Now consider the economy in the steady state: The steady state is defined as a point in the long run where the ratio of capital to effective unit of labor (K/AL) remains constant over time. Mathematically, it can be shown that this will always be reached regardless of what initial values the exogenous variables will take. In other words, there will be no growth in K/AL after a while (although capital, labor, technology, and output might actually continue to grow). The steady state is important as its conclusions give predictions to economic growth in the long run. For the questions below continue to assume that labor grows at a constant rate g, and technology at a constant rate ga. 27) At the steady state, derive an equation for the growth rate of output in terms of the exogenous variables. 28) At the steady state, derive an equation for the growth rate of output per labor (Y/L) in terms of the exogenous variables. How does it depend on the exogenous variables? Suppose there are two identical countries (have the same values of the exogenous variables) except one has a higher savings rate (s). At the steady state, what country has a higher growth rate in output per labor?

Now consider the economy in the steady state: The steady state is defined as a point in the long run where the ratio of capital to effective unit of labor (K/AL) remains constant over time. Mathematically, it can be shown that this will always be reached regardless of what initial values the exogenous variables will take. In other words, there will be no growth in K/AL after a while (although capital, labor, technology, and output might actually continue to grow). The steady state is important as its conclusions give predictions to economic growth in the long run. For the questions below continue to assume that labor grows at a constant rate g, and technology at a constant rate ga. 27) At the steady state, derive an equation for the growth rate of output in terms of the exogenous variables. 28) At the steady state, derive an equation for the growth rate of output per labor (Y/L) in terms of the exogenous variables. How does it depend on the exogenous variables? Suppose there are two identical countries (have the same values of the exogenous variables) except one has a higher savings rate (s). At the steady state, what country has a higher growth rate in output per labor?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Production And Growth

Section17.1: Economic Growth Around The World

Problem 1QQ

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Forecasts for Sa’s economic growth rate have been droppingconsistently in 2023, from 1.2% year on year at the start of thefirst quarter to 0.7% in March, 0.6% in April and now 0.4% inthe outcome of the May survey (all Bloomberg).A more recent survey from Reuters in May places the outlookfor economic growth even lower, at 0.2% for 2023.Market perceptions of the global outlook have also dimmed, withChina’s economic recovery proving weaker than anticipatedafter its 2022 lockdowns, as recent production data disappoints,including that on household spending, investment and tradeactivity.Global trade defragmentation is also weakening sentiment, withrisks of limitations on trade competitiveness growing. Theseconcerns, along with US recession fears and disappointment overChina’s ability to lead the global economy stronger in 2023, haveweakened sentiment, reflecting in the recent fall in oil prices.Markets had expected a ramp-up in economic activity in Chinain the second quarter, but has also…
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