In the neoclassical growth model, suppose the per worker production function is y=2k0.5 Suppose s=0.10, n=0.07, and d=0.06. The steady-state equilibrium capital-labour ratio is k=(Round to two decimal places.)
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- Based on the Neoclassical Growth Model explain in detail what are the critical determinants of economic growth. Also, specify related assumptions.Compare the similarities and the differences between the Economic Growth concept by the Neoclassical School of Thought with Keynesian System for Economic Growth.Suppose that output is given by the neoclassical production function Y (t) = F (K(t), L(t), A(t)) satisfying Assumptions 1 and 2, and that we observe output, capital, and labor at two dates t and t + T . Suppose that we estimate TFP growth between these two dates using the equation Where g(t, t + T ) denotes output growth between dates t and t + T , and other growth terms are defined similarly, while αK(t) and αL(t) denote the factor shares at the beginning date. Let x(t, t + T ) be the true TFP growth between these two dates. Show that there exist functions F such that x(t, t ˆ + T )/x(t, t + T ) can be arbitrarily large or small. Next show the same result when the TFP estimate is constructed using the end-date factor shares: Explain the importance of differences in factor proportions (capital-labor ratio) between the beginning and end dates in these results.
- A common Wall Street rule of thumb is that the growth rate ought to be roughly equal to the: Group of answer choicesConsider the Ramsey growth model with utility function Assume there are no taxes. a. Derive the conditions describing a steady state. b. Solve these conditions to obtain the steady-state values of C, K, and L. c. What is the effect on the steady state of an increase in b?Consider the simple innovation model studied in class. In this model, the society allocates a fraction "gamma" of workforce to innovation and the remaining fraction to production. Suppose that, for simplicity, total workforce is normalized to unity: L = 1. If the productivity growth rate is defined by d A t/dt = "theta"* "gamma" * A_t and real GDP per worker by yt = At* (1 - "gamma"), what is the long-run growth rate of y_t?
- Which of the following is an incorrect statement about the variable ‘s’ in the Solow Growth Model? a.s is the fraction of income that is saved b.s is an exogenous factor c.s is referred to as saving per worker d.s determines how income is allocated between consumption and investmentAccording to the neoclassical growth model: A. The equilibrium growth rate can never change B. The rate of population growth is negatively correlated with output per capita. C. A change in the savings rate does not affect a countrys welfare D. Savings and investments are never equal.The neoclassical theory of growth identifies the steady-state rate of growth as the _________ just sufficient to keep ____________ constant while labour grows. technology, productivity consumer demand, output investment, capital per person savings, investment
- Consider the simple innovation model. In this model, the society allocates a fraction "gamma" of workforce to innovation and the remaining fraction to production. Suppose that, for simplicity, total workforce is normalized to unity: L = 1. If the productivity growth rate is defined by d A_t / d t = "theta" * "gamma" * A_t and real GDP per worker by y_t = A_t * ( 1 - "gamma" ), what is the long-run growth rate of y_t ?Neoclassical regional growth theory focuses exclusively on the role of ___________ as the fundamental determinant of changes in local labor market or metropolitan area output. A. Demand B. Supply C. Both demand and supply D. None of themSuppose some of the country's capital is suddenly destroyed. If the depreciation rate, savings rate, and production function remain unchanged, then the real growth rate will _____ in the short run and the steady-state level of capital will _____ increase, decrease, or stay the same?
