Solow Models If depreciation and population growth i.e. Break-even investment is less than actual investment, we are located: a. to the right of k* b. to the left of k* c. at k*
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- 10. In the steady state in a Solow model including effective/productive workers, the growth of output per effective worker is: G 0 N+G Depreciation rate Savings ratePopulation Growth Population growth in the US has, for a very long time been about 1% per year.Take the production function to be y = k0.5, where y and k are output andcapital per capita. The depreciation rate is about 10% per year and the savingsrate is about 20%. 1. What is the steady state capital per capita rate?2. From one period to the next, at what rate does total capital (not percapita) grow.3. If the population growth rate grew to 1.5%, how much would steady statecapital per capita change? Then how much is total capital changing atthis steady state?Consider a Solow–Swan model with saving rate s = 0.4, labour force growth gL = 0.05, constant productivity A = 1, and depreciation ?δ = 0.05. If output per worker is y = Y/L = 200 and capital per worker is k = K/L = 1000, which of the following is true? Group of answer choices - Effective depreciation per worker is 80, saving per worker is 100 and k will increase towards the steady state - Effective depreciation per worker is 100, saving per worker is 80 and k will decrease towards the steady state - Effective depreciation per worker is 100, saving per worker is 80 and k is at the steady state - Effective depreciation per worker is 80, saving per worker is 100 and k will decrease towards the steady state
- Q) Suppose that the depreciation rate increase. In the Solow growth model, determine the effects of this on the quantity of capital per worker (k) and on output per worker (y) in the steady state. Show with graphs Copy paste answer strictly prohibited . So explain it own words and correctly.Consider a basic Solow–Swan model with constant labour force L and constant total factor productivity A. Suppose the saving rate is s = 0.2 and the depreciation rate is δ = 0.05. Suppose also that steady-state output is 100. Which of the following is true? Group of answer choices All of the other options Steady state capital per worker is 500 Steady state investment per worker is 20 The steady state capital/output ratio is 6I have to change the savings rate, but trying to figure out how to start. Let’s work out 5 periods of a Solow model with labor augmenting productivity (Z) growth. In your toy economy, the savings rate is 10%, and the depreciation rate is 50% (the high depreciation rate will get us to steady-state faster--think of each period as a decade). The population is fixed (treat it as one worker, N=1 forever). You always start off with 1 unit of capital, and TFP = Z = 1 during the first period. Since TFP and population never change, output each period is created this way: Yt = Kt(1/3)Zt(2/3) Consider two worlds: One where labor augmenting productivity (Z) grows 20% per period, and one where labor augmenting productivity (Z) grows 10% per period Answer the following questions for each of the two worlds What is capital each year, in years 1-5? What is GDP each year, in years 1-5? What is the marginal product of capital each year (MPK) in years 1-5? What is the wage in each period? In a steady…
- Parameters Equations s =0,20 marginal propensity to save Y=WKr.L1-r Production Function u=0,02 Population growth rate K.=s.f(k)−aK Capital Accumulation b=0,04 Technological growth rate L./L= ? Population Growth a=0,05 Depreciation rate W./W=b Technological Progress S=s.f(k) Savings a. Find steady-state level of capital per effective labor: k* b. Draw a graph and show output function, actual investment and breakeven investment lines. c. Assume that in this economy, people start spending more and therefore marginal propensity to save decline permanently. What will happen to variables in the model (steady-state level capital per effective labor; output growth etc.). d. Instead of reduction in saving assume this time that we face lower fertility rate in the country. What will happen to variables in…Solow Models When population growth and depreciation are non-zero, what is the Solow equation: a. Δk = sf(k) - (δ)k b. Δk = (δ+n)k - f(k) c. Δk = f(k) - (δ+n)k d. Δk = sf(k) - (δ+n)k Starting to the right of k*, as we move toward k*, Investment a. increases b. decreases c. stays the same.a.High-income countries usually experienced lower GDP growth compared to middle-income countries. Justify the statement above by using Solow Growth Model. Include the investment-depreciation diagram in your answer.
- Consider a basic Solow–Swan model with constant labour force L and constant total factor productivity A. Suppose the saving rate is s = 0.2 and the depreciation rate is ? = 0.05. Suppose also that steady-state output is 100. Which of the following is true?Group of answer choices Steady state investment per worker is 20 The steady state capital/output ratio is 6 Steady state capital per worker is 500 All of the other options4.The Solow growth model differs from the Harrod-Domar because: a.Assumes that depreciation rate and population growth are exogenous b.Assumes that the rate of technological progress varies from country to country. c.Predicts that permanent growth is achievable only through technological progress d.Predicts that poorer countries will grow faster than richer countries.A Solow Growth Economy with production function Y=K¹/²(AL)¹/² has a savings rate of 24 percent, a depreciation rate of 2 percent, labour force growth of 1 percent and technological progress improving at 3 percent per year. Provide a labelled diagram to illustrate and quantify the determination of equilibrium output per effective worker and capital per effective worker.