The production function for an economy is Y; = 1.5 K;ª L¢(1«), where Y; is total output, Ke is total capital, and L; is total labor. Total savings for the economy is given by S; = 0.2 Y;. The rate of population growth, n, is 5% and the rate of depreciation, 5, is 10%. Write down the per capita production function. (a) (b) Write down the fundamental equation of Solow-Swan. (c) Imagine that a=0.7. In the long run, what is the growth rate of per capita output, y? In the long run, what is the growth rate of total output, Y;? (d) In the long run, is there a constant level of capital per person, output per person and consumption per person? If so what are they? If not, why not? (e) initially in steady state, what are the effects on the levels and growth rates of k, y, and c? (1) Imagine that the depreciation rate increases from 10% to 12%. If the economy is Imagine that a=1. In the long run, what is the growth rate of per capita output, y:? In the long run, what is the growth rate of total output, Y;? Is your answer different from (c)? If so, why?

The production function for an economy is Y; = 1.5 K;ª L¢(1«), where Y; is total output, Ke is total capital, and L; is total labor. Total savings for the economy is given by S; = 0.2 Y;. The rate of population growth, n, is 5% and the rate of depreciation, 5, is 10%. Write down the per capita production function. (a) (b) Write down the fundamental equation of Solow-Swan. (c) Imagine that a=0.7. In the long run, what is the growth rate of per capita output, y? In the long run, what is the growth rate of total output, Y;? (d) In the long run, is there a constant level of capital per person, output per person and consumption per person? If so what are they? If not, why not? (e) initially in steady state, what are the effects on the levels and growth rates of k, y, and c? (1) Imagine that the depreciation rate increases from 10% to 12%. If the economy is Imagine that a=1. In the long run, what is the growth rate of per capita output, y:? In the long run, what is the growth rate of total output, Y;? Is your answer different from (c)? If so, why?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Given a saving rate of 5%, a depreciation rate of 1%, and a production function in which y = k0.5where y is output per worker and k is capital per worker, calculate the steady state values fori. capital per worker, ii. output per worker, iii. consumption per worker
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