If the current capital stock per person in South Korea is greater than the current capital stock per person in China and total factor productivity is the same in both countries, according to the Solow model: a. Both South Korea and China initially will grow at the same rate and have the same steady state b. China initially will grow faster than South Korea, but each will have the same steady state c.China initially will grow faster than South Korea and will have a higher steady state d. China initially will grow slower than South Korea, but each will have the same steady state е. China initially will grow faster than South Korea and will have a lower steady state

If the current capital stock per person in South Korea is greater than the current capital stock per person in China and total factor productivity is the same in both countries, according to the Solow model: a. Both South Korea and China initially will grow at the same rate and have the same steady state b. China initially will grow faster than South Korea, but each will have the same steady state c.China initially will grow faster than South Korea and will have a higher steady state d. China initially will grow slower than South Korea, but each will have the same steady state е. China initially will grow faster than South Korea and will have a lower steady state

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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Question 5a. According to Solow Growth model, capital stock is a key element of the economy’s output. Despite this, capital stock changes over time, where those changes can lead to economic growth. Given the two forces that influence capital stock, show graphically and mathematically how a steady state level of capital is determined.
21) Assume the Solow growth model. Suppose two countries that are similar in everything except in the savings rates. If country A has a lower saving rate than country B, then: (choose one) -Country A grows faster than country B in the long run. -Both countries growth at the same rate in the long run. -Country B grows faster than country A in the long run. -Both countries have the same standard of living in the long run. 22) In the two-sided search model from Chapter 6, an increase in worker bargaining power “a” looks the same in graphs as does either an increase in unemployment insurance benefit “b” or the introduction of a minimum wage above the initial market wage. (choose one) -true -false
5. Use the simple Solow model, with no population growth. The formula for steady-state consumption per worker (c*) as a function of output per worker and investment per worker is: c * = f(k*) - δk* c * = f(k*) + δk * c * = f(k*) ÷ nk* c * = k* - f(k)*
1 According to the Solow Model, which of the following statements is correct? 1. An increase in the depreciation rate of capital reduces the long-run growth rate of per-capita output 2. An earthquake that destroys 20 percent of the country capital reduces the long-run level of output 3. An increase in the rate of population growth reduces the long-run growth rate of per-capita output 4. A permanent increase in the Total Factor productivity increases on the long-run level of per-capita output
Q1) Consider a Solow economy that is on its balanced growth path. Assume for simplicity that there is no technological progress. Now suppose that the rate of population growth falls.(a) What happens to the balanced-growth-path values of capital per worker, output per worker, and consumption per worker? Sketch the paths of these variables as the economy moves to its new balanced growth path.(b) Describe the effect of the fall in population growth on the path of output (that is, total output, not output per worker).
Based on article "Technology and economic growth: From Robert Solow to Paul Romer" by Rui Zhao, Solow mentioned technology (At) and capital per unit of effective labor (Kt) have a significant influence on a country's ability to “catch-up” or “converge” to a steady-state level (K*). Using the central equation of the Solow model, discuss the influence of At and Kt on country's ability to grow and move to a steady-state level (K*).
QESTION 6 for which of the following does the Solow model NOT provide adequate explanation? a. What causes long-term economic growth b. The case of productivity differences across countriesc. Why saving rates differ across countries d. All of these answers are correct e. Why population growth rates differ across countries Using the Solow model, if, in time, t=0, the initial capital stock is 100, investment is 25, the population is normalized to 1, and e 10 percent, then capital accumulation from period t=0 to period t=1 is: a. 15 b. 115 c. 35 d. D. 0 e. -15
1. Carefully draw a graph depicting steady state conditions within the Solow Growth Model framework. Carefully explain, making reference to depreciation rates and savings rates, how the steady state level of capital is determined. Now, demonstrate how the economy can grow from this point forward (in separate analyses) assuming: (a.) widespread improvements in production technology, and (b.) increases in savings rates. For each analysis show and carefully describe how the new steady state level of capital is attained.
1. Draw a well-labeled graph that illustrates the steady-state of the Solow model with population growth. Use the graph to find what happens to steady-state capital per worker and income per worker in response to each of the following exogenous changes.a. A change in consumer preferences increases the saving rate.b. A change in weather patterns increases the depreciation rate.c. Better birth-control methods reduce the rate of population growth.
Suppose an economy described by the Solow model is in a steady state with population growth n of 1.8 percent per year and technological progress g of 1.8 percent per year. Total output and total capital grow at 3.6 percent per year. Suppose further that the capital share of output is 1/3. If you used the growth-accounting equation to divide output growth into three sources—capital, labor, and total factor productivity—how much would you attribute to each source?
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?
3. Consider the Basic Solow growth model with a Cobb-Douglas production function and no technological change for the economy china. In this island economy, capital’s share α= 0.3, the annual depreciation rate on capital δ = 0.08 and the annual population growth rate n = 0.02. Suppose that this is the year 2017, and the economy is in the steady-state with GDP (Y) = 200 bananas, and capital stock K = 400 bananas. [Feel free to use any form of exponentiation that works best for you] Project the equilibrium level of GDP for 2050. Calculate the market value of fixed capital (K) in 2050 on a gross basis. Using the steady-state conditions, solve for the saving rate (s*) that is consistent with a stable steady-state.