Suppose that the depreciation rate increases. In the Solow growth model, determine the effects of this on the quantity of capital per worker and on output per worker in the steady state. Explain the economic intuition behind your results.
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- What do the growth accounting studies conclude are the determinants of growth? Which is more important, the determinants or how they am combined?What are the advantages of backwardness for economic growth?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 Note:- copy paste answer not provided. Give me your own words and correctly explains.
- 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.2. Solow-Swan Model (a) You will demonstrate the importance of diminishing returns to capital in the Solow-Swanmodel. Draw a Solow-Swan diagram in which there are constant returns to capital. Thiswould happen if the production function were Yt= AKt, where A = 1. Furthermore,assume that the sum of population growth and the depreciation rate is greater than thesaving rate. Does the economy converge to a steady state in this case? To answer thisquestion, you should draw a Solow-Swan diagram in terms of output per person, as we didin class. Use this diagram to explain why the economy converges to a steady state or doesnot. (b) Assume, instead, that the sum of population growth and the depreciation rate is equal tothe saving rate. In this case, are there any steady states? If yes, describe the steady-statelevels of capital per person. If no, explain why not. (Note: Diagram is not needed for thispart.)Consider the following Solow diagram, indicating two sep-arate savings rates, 0.2 and 0.4: Suppose the savings rate is 0.2. At the steady state, what is capital per worker? What is output per worker? How much is saved per worker? Suppose the population growth rate is equal to the depreciationrate. Solve for n and d.
- Consider the Solow growth model with concave production function as studied in class. Supposethe economy is initially in the picture below, and currently has the level of capital stock of K0. What wouldhappen to the dynamics of capital accumulations when depreciation rate increases? Graphically denote thedirection and the speed of change/accumulation/decumulation of the capital stock, then verbally explain whythey move like so.10.In the Solow model of economic growth, a country with a higher rate of capital depreciation will, ceteris paribus, have a steady-state equilibrium withA. lower output per worker.B. higher capital to labour ratio.C. the same capital to labour ratio.D. more investment. PROVIDE A BRIEF WRITTEN EXPLANATION JUSTIFYING YOUR CHOICE.Consider the Solow Model with no population or technological growth. Suppose that two countriesare identical except that in Country A the depreciation rate is greater than the depreciation rate inCountry B.a. How do you compare the steady state level of capital per worker in these countries? Illustrategraphically. Explain the economic intuition for the di erences in capital per worker in steadystate.b. Which country a higher output per worker in steady state? What about investment per workerin steady state? Explain carefully.
- Explain the basic theory of Solow Growth model, highlight the production function and basic assumptions of Solow Growth model. Show the steady-state condition. [Use the production function: = ?? 1/3? 2/3 ]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.In this problem, we distinguish between labor and population in the Solow growth model. A proportion of the population, a, between zero and one, works. The production function is now written as Y = A(K^1/3)[(aL)^2/3] (a) How does an increase in a from 0.3 to 0.6 change steady state GDP? (b) Does it change the steady-state capital? Explain. (c) Suppose a rises steadily over time. How do you think would affect the growth rate of GDP?
