Answered: Please solve all subparts A,B,C,D max…

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter9: An Introduction To Basic Macroeconomic Markets

Section: Chapter Questions

Problem 9CQ

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Please solve all subparts A,B,C,D max in 30 minutes and no reject thank u

A. Explain what is meant by the 'steady state' and find capital per worker and output per worker in the steady state of Wonderland.

B. Illustrate the steady state of Wonderland using a diagram.

C. The country of Neverland is identical to Wonderland in terms of output per worker, the savings rate, the depreciation rate and population growth. They differ in one respect: Wonderland has capital per wolker of 10, whereas Neverland has capital per worker of 20. Which country experiences a higher growth rate of output per worker and how will their growth rates evolve over time?

D. How might Wonderland and Neverland achieve economic growth in the long-run?

2. In Wonderland production per worker (y) depends on capital per
worker (k) such that y = 10Vk. Every year 15% of the capital stock
depreciates, while workers in Wonderland save 10% of their income.
Every year the population grows at a rate of 5%.

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