W=technology and r is standard share parameter of Cobb-Douglas production.Y = W . K^r . L^1-ra.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 the model (steady-state level capital per effective labor; output growth etc.). 3.By using the same production function in question 2: Assume the followings:ParametersEquationss =0,20marginal propensity to saveY = WK"L1-rProduction Functionu=0,02Population growth rateK = s. f(k)- aKCapital Accumulationb=0,04Technological growth ratePopulation Growth= uLW=bWa=0,05Depreciation rateTechnological ProgressS = s. f(k)SavingsFind steady-state level of capital per effective labor: k*а.b.Draw a graph and show output function, actual investment and breakeven investmentlines.с.Assume that in this economy, people start spending more and therefore marginalpropensity to save decline permanently. What will happen to variables in the model(steady-state level capital per effective labor; output growth etc.).Instead of reduction in saving assume this time that we face lower fertility rate in thed.country. What will happen to variables in the model (steady-state level capital pereffective labor; output growth etc.). 2.Assume that we have a Cobb-Douglas type aggregate production function in the form:Y = WK"L1-rwhere : W=technology and r is standard share parameter of Cobb-Douglas production function.

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Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter9: Production Functions

Section: Chapter Questions

Problem 9.8P

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W=technology and r is standard share parameter of Cobb-Douglas production.

Y = W . K^r . L^1-r

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 the model (steady-state level capital per effective labor; output growth etc.).

3.
By using the same production function in question 2: Assume the followings:
Parameters
Equations
s =0,20
marginal propensity to save
Y = WK"L1-r
Production Function
u=0,02
Population growth rate
K = s. f(k)
- aK
Capital Accumulation
b=0,04
Technological growth rate
Population Growth
= u
L
W
=b
W
a=0,05
Depreciation rate
Technological Progress
S = s. f(k)
Savings
Find steady-state level of capital per effective labor: k*
а.
b.
Draw a graph and show output function, actual investment and breakeven investment
lines.
с.
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.).
Instead of reduction in saving assume this time that we face lower fertility rate in the
d.
country. What will happen to variables in the model (steady-state level capital per
effective labor; output growth etc.).

2.
Assume that we have a Cobb-Douglas type aggregate production function in the form:
Y = WK"L1-r
where : W=technology and r is standard share parameter of Cobb-Douglas production function.

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