Question 6. The Solow model In an economy, there are L = 16 workers and their productivity is. A = 0.04. People save s = 0.35 of their income. The production function is Y = √√√L. The depreciation rate is 8 = 0.04 (a) Currently, there is Ko = 64.33. Find the output, the investment, the consumption, and the next year's capital. (b) Write down the steady state condition. Find the steady state capital, output, investment, and consumption. (c) Draw the Solow model graph in the coordinates of capital and investment. Show current capital, next year's capital, and the steady-state capital. (d) The marginal product of capital is MPK = 0.5√Ā√ī/√K. Write down the consumption maximization condition. Find the golden rule rate of savings. 6. (a) 6.42, 4.17, 2.25, 64 (b) 49, 5.6, 1.96, 3.64 (d) 50%

Question 6. The Solow model In an economy, there are L = 16 workers and their productivity is. A = 0.04. People save s = 0.35 of their income. The production function is Y = √√√L. The depreciation rate is 8 = 0.04 (a) Currently, there is Ko = 64.33. Find the output, the investment, the consumption, and the next year's capital. (b) Write down the steady state condition. Find the steady state capital, output, investment, and consumption. (c) Draw the Solow model graph in the coordinates of capital and investment. Show current capital, next year's capital, and the steady-state capital. (d) The marginal product of capital is MPK = 0.5√Ā√ī/√K. Write down the consumption maximization condition. Find the golden rule rate of savings. 6. (a) 6.42, 4.17, 2.25, 64 (b) 49, 5.6, 1.96, 3.64 (d) 50%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Q7 An economy has a Cobb–Douglas production function: Y = Kα(LE)1−α The economy has a capital share of 1/3, a saving rate of 24 percent, a depreciation rate of 3 percent, a rate of population growth of 2 percent, and a rate of labor-augmenting technological change of 1 percent. It is in a steady state. a. At what rates do total output, output per worker, and output per effective worker grow?b. Solve for capital per effective worker, output per effective worker, and the marginal product of capital. c. Does the economy have more or less capital than at the Golden Rule steady state? How do you know? To reach the Golden Rule steady state, does the saving rate need to increase or decrease?d. Suppose the change in the saving rate you described in part (c) occurs. During the transition to the Golden Rule steady state, will the growth rate of output per worker be higher or lower than the rate you derived in part (a)? After the economy reaches its new steady state, will the growth rate of…
The COVID-19 pandemic has caused an unprecedented increase in savings in many countries around the world. In the EU, the savings rate of households has jumped from 12.5% to 17%. In 2008-2009, it had moved from 12.5% to 14% (Dossche and Zlatanos 2020). Even if the source of 2020 surge in savings is different from the one of 2008, it is obvious that this increase does not result in more investment and growth. QUESTION: 1. With reference to the paradox of thrift discuss the appropriate approach by the government to get the economy out of economic downturn swiftly
Question 2 If a natural disaster destroys a large portion of a country's capital stock but the saving and depreciation rates are unchanged, the Solow model predicts that the economy will grow and eventually reach:a. A lower steady-state level of output than it would have before the disasterb. None of these answers is correctC. The same steady-state level of output as it would have before the disasterd. A higher steady-state level of output than it would have before the disaster e. Not enough information is given now suppose you are given the data for Brazil and Portugal. In Brazil, the saving rate is 0.1 and the depreciation rate is 0.1, while in Portugal saving rate is 0.2 and the depreciation rate is 0.1. Using the Solow model, you conclude that in the steady-state: a. Brazil has a higher capital-output ratio than Portugal b. Portugal has a higher capital-output ratio than Brazil c. Brazil has a higher level of output than Portugal d. Portugal has a higher level of output than…
Assume a country is in steady state. Explain what will happen id a disaster hit the country and destroyed 40% of its capital stock, but nobody is killed. Draw the diagram of solow model.
Consider an Economy in steady state, with a Cobb Douglas Production function. They have a savings rate of 45% and a capital share of 2/7. Technological progress is 1%, population growth is 3%, and Depreciation is 5%. 1. Derive the Production function per effective worker and solve for steady state capital, output, and consumption per effective worker. 2. What is MPK in the steady state? Is this country saving too much or too little? How do you know? 3. What should you lower or raise the saving rate to, in order to reach the golden rule steady state
Problem 1: How can policymakers influence a nation’s saving rate? Problem 2: 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. d. A one-time, permanent improvement in technology increases the amount of output that can be produced from any given amount of capital and labor.
Suppose a Solow economy is initially at its steady state k∗, and suddenly is hit by a decrease in the depreciation rate δ, from δ to δ1. This change does not alter any of the other exogenous parameters in the model Depict this situation in a graph What happens to steady state level of capital per capita in this situation? What happens to the level of capital per capita over time? Depict this in a graph and explain intuitively.
Say an economy begins with an initial level of capital per worker, k0, that is above its steady state level of capital per worker, k*. All else equal, what will happen to output per worker and capital per worker?
In the Solow model, if investment per-worker initially exceeds saving per-worker, how isthe steady-state capital per worker reached? Draw a graph to support your answer
1. In the Solow model, if investment (I=sY) is lower than depreciation (dK), then…. A. Depreciation (dK) in the following period will be higher than in the current period. B. Capital stock (K) in the following period will be lower than in the current period. C. Per-capita GDP (y) in the following period will be the same as in the current period. D. Overall GDP (Y) in the following period will be higher than in the current period. The answer is B - - Can you show work for it, graph the representation for it
Draw the Solow model and fully labe the graph please. It should include per-worker production, steady state investment per-worker and a label for consumption. Where is the Golden Rule consumption level located? Is the golden rule located at the maximum sustainable capital level? why or why not. PLEASE DRAW OUT THE IMAGE I AM A VISUAL LEARNER PLEASE.
An increase in research productivity: Suppose the economy is on a balanced growth path in the Romer model, and then, in the year 2030, research productivity z̅ rises immediately and permanently to the new level z̅′. Solve for the new growth rate of knowledge and yt. Make a graph of yt over time using a ratio scale. Why might research productivity increase in an economy? I do not understand how to solve this, I'm confused. Am I supposed to make an equation or write out an answer?