2. In the Solow growth model, suppose that theper-worker production function is given by yzk, with s = 0.25, d= 0.1, and n=0.02.(a) Suppose that in country A, z = 1. Calculateper capita income and capital per worker.(b) Suppose that in country B, z = 2. Calculateper capita income and capital per worker.(c) As measured by GDP per capita, how muchricher is country B than country A? Whatdoes this tell us about the potential fordifferences in total factor productivity toexplain differences in standards of livingSacross countries?

We have, y = zk.3, s = 0.25 d = 0.1 n = 0.02.

er production function is given by y = as = 0.25, d= 0.1, and n = 0.02. ose that in country A, z = 1. Calculate apita income and capital per worker. -ose that in country B, z = 2. Calculate apita income and capital per worker. easured by GDP per capita, how much r is country B than country A? What this tell us about the potential for rences in total factor productivity to %3D %3D

er production function is given by y = as = 0.25, d= 0.1, and n = 0.02. ose that in country A, z = 1. Calculate apita income and capital per worker. -ose that in country B, z = 2. Calculate apita income and capital per worker. easured by GDP per capita, how much r is country B than country A? What this tell us about the potential for rences in total factor productivity to %3D %3D

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter20: Economic Growth In The Global Economy

Section: Chapter Questions

Problem 5P

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Similar questions

What are the advantages of backwardness for economic growth?
In the Solow growth model:1. What is the equilibrium effect of an increase in the population growth rate?2. What is the equilibrium effect of an increase in TFP?3. Which of these shocks is better able to generate sustained growth: a decrease in thepopulation growth rate, or an increase in TFP? How does this compare with theresults of the Malthusian model of economic growth?
In this problem, we distinguish between labor and population in the Solow growth model. A proportion of the population, a, between zero and one, works. The production function is now written as Y = A(K^1/3)[(aL)^2/3] (a) How does an increase in a from 0.3 to 0.6 change steady state GDP? (b) Does it change the steady-state capital? Explain. (c) Suppose a rises steadily over time. How do you think would affect the growth rate of GDP?
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Solve both 1.In the Solow growth model with population growth of 5 per cent and a labour augmenting technological progress of 3 per cent, the economy’s: Select one: a. number of workers grow at 5 per cent while the number of effective workers grow at 2 per cent. b. number of workers grow at 3 per cent while the number of effective workers grow at 8 per cent. c. number of workers grow at 5 per cent while the number of effective workers grow at 8 per cent. d. number of workers grow at 5 per cent while the number of effective workers grow at 3 per cent. 2. Schumpeter's “creative destruction” is an explanation of economic progress resulting from: Select one: a. new product producers driving incumbent producers out of business. b. breaking down barriers to trade and development. c. using up scarce natural resources to create new products. d. creating new methods to destroy the environment.
In the Solow growth model, suppose that the per-worker production function is given by y=zk2/3 . The saving rate is s, depreciation rate is d, and population growth rate is n. Calculate the per capita capital (k) and output per worker (y) in the steady state.
Indicate the statements True or False 4) Generally speaking, faster technological progress implies faster depreciation of human capital. 5)The long-run growth rate of real GDP per capita is determined solely by population growth rate.
This question is about the Solow model. For 2 countries, 1 and 2 which has the same rate of population growth and depreciation and the same saving rate, and are in initial steady state, their capital have equal importance for production for both countries with the same value of α = 1/2 a. In the initial steady state, country 1 has 2 times the output per capita to country 2 because of its greater productivity A. Please use the steady-state equation to find the ratio of the 2 countries’ ratio of productivity and explain it. b. Find the 2 countries’ ratio of capital per capita and explain it. c. Please explain in detail if the capital owners in country 1 are motivated to move their capital from country 1 which is capital abundant, to country 2 which is more capital scarce? Hint: the 2 countries’ payment per unit of capital d. Does workers in country 2 motivated to immigrate to country 1? Please explain from the perspective of the 2 countries’ wages.
3. An economy described by the Augmented Solow growth model has the following production function with populationgrowth (1+n) and technological growth (1+z):y =p(k)(a) Solve for the steady-state values of capital per capita and output as a function of s, n, z, and δ.(b) A developed country has a saving rate of 28 percent and a population growth rate of 1 percent per year. A lessdeveloped country has a saving rate of 10 percent and a population growth rate of 4 percent per year. In bothcountries, g = 0.02 and d = 0.04. Find the steady-state value of y for each country.(c) What policies might the less developed country pursue to raise its level of income? Graphically demonstrate howyour advised policy would increase income per capita (y).
Explain the importance of research about the standard of living and the endogenous growth model in a country. Why the standard of living is related to Solow Growth model?
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(III) Consider a version of the Solow growth model without technological change covered in lecture with a rate of population growth of zero (i.e. n=0). Assume that the country has been at the BGP for many years and that suddenly at time t ̅ there is a onetime increase in its population. Show how the economy will adjust to a new BGP by working with the modified system (per capita/worker variables). Show how capital per worker adjusts to the new Steady State level and how its growth rate changes over time.