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Graphically explain the golden rule level of capital.
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- Discuss the golden rule level of capital using a diagram and explain why it is beneficial?What happens in the steady state to the capital-labor ratio, output per worker, and consumption per worker when each of the following events occur? You should assume that the steady-state capital-labor ratio is below the Golden Rule level.The Golden Rule level of capital accumulation is the steady state with the highest level of consumption. Illustrate this statement showing well where the economy would move if it were to move to a new steady state.
- The golden rule level of capital accumulation is the steady state with the highest level of consumption.illustrate this statement showing well the economy would move if it were to move to a new steady stateWhy does an increase in the labor force cause the Market Productivity of Capital to increase?How does the price of capital tend to change during an economic boom? During a recession?
- How does the price of capital tend to change during a boom? During a recession?What is a significant factor in long-run economic growth that Robert Fogel, an economic historian, is best known for suggesting?Consider the following (made-up) statistics for some econ-omies. Assume the exponent on capital is 1/3 and that the labor composition is unchanged. For each economy, compute the growth rate of TFP.(a) A European economy: gY/L = 0.03, gK/L = 0.03.(b) A Latin American economy: gY/L = 0.02, gK/L = 0.01.(c) An Asian economy: gY/L = 0.06, gK/L = 0.15.
- Assume a Cobb-Douglas production with capital share 1/3; total factor productivity equal to 2, total population in an economy is equal to 1, the steady-state level of capital stock is 8.0. Then the steady-state level of output is about: a. 4.0 b. 2.0 c. 22.6 d. 8.0 e. 45.4Explain why the cycle of productive capital represents the constant renewal of capital-value, as opposed to the cycle of money-capital.Suppose that , the marginal product of efficiency units of labor, increases in the endogenous growth model. What effects does this have on the rates of growth and the levels of human capital, consumption, and output? Explain your results.