• (ii) What is the relation between Kt and He? Use this relation to write down total output as a function of Ktonly. Imagine that the number of people in this economy, Nt, is different from the number of workers because some people do not work. Let l; Lt - be the number of workers per capita (the fraction of the population that works). Let y, = be output per capita and Yt %3D Nt Nt Kt k, = - be capital per capita. Finally, let n be the rate of population growth and y, be the growth rate of labor. Nt (iii) Using the "effective production function" you derived in (b), write down output per capita, yt, as a function of capital per capita, kt, labor per capita, lt, the level of population N+, and the level of technology, A. Following Solow and Swan, assume there is no government and no net exports, that the depreciation rate of capital is the constant 8 > 0 and the savings rate is constant 0 < s<1. • (iv) DERIVE the fundamental equation of Solow-Swan. How does the growth rate of capital depend on employment per person, le? Explain intuitively.

• (ii) What is the relation between Kt and He? Use this relation to write down total output as a function of Ktonly. Imagine that the number of people in this economy, Nt, is different from the number of workers because some people do not work. Let l; Lt - be the number of workers per capita (the fraction of the population that works). Let y, = be output per capita and Yt %3D Nt Nt Kt k, = - be capital per capita. Finally, let n be the rate of population growth and y, be the growth rate of labor. Nt (iii) Using the "effective production function" you derived in (b), write down output per capita, yt, as a function of capital per capita, kt, labor per capita, lt, the level of population N+, and the level of technology, A. Following Solow and Swan, assume there is no government and no net exports, that the depreciation rate of capital is the constant 8 > 0 and the savings rate is constant 0 < s<1. • (iv) DERIVE the fundamental equation of Solow-Swan. How does the growth rate of capital depend on employment per person, le? Explain intuitively.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter19: The Macroeconomic Perspective

Section: Chapter Questions

Problem 25CTQ: Cross country comparisons of GDP per capita typically use purchasing power parity equivalent...

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