Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
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Question
Chapter 8, Problem 5QQ
To determine
The Solow growth model.
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Students have asked these similar questions
An economy described by the Solow growth model has the following production
function:
y = Vk
A. Solve for the steady-state value of y as a function of s, n, g, and d.
B. A developed country has a saving rate of 28 percent and a population growth rate of 1
percent per year. A less developed country has a saving rate of 10 percent and a population
growth rate of 4 percent per year. In both countries, g = 0.02 and d= 0.04. Find the steady-
state value of y for each country.
C. What policies might the less developed country pursue to raise its level of income?
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 change in weather patterns increases the depreciation rate.
b. Better birth-control methods reduce the rate of population growth.
In the Solow–Swan model, a decrease in the rate of population growth will have what effect on the steady-state level of real GDP per capita?
a. Increase
b. No change in real GDP per capita because although it does change the rate at which output and population are growing, it will make both growth rates change by the same amount and so the output-population ratio will be unchanged
c. Decrease
d. No change in real GDP per capita because although it does change the level of labour, the level of capital will change to keep the capital-labour ratio the same as before
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Similar questions
- How does the Solow growth model explain economic growth?arrow_forwardIn economics, we should know about the standard of living, the knowledge about Solow growth model and endogenous growth model of a country. Why it is so importance to know all of these?arrow_forwardWhat are the implication of economic growth that relate with Solow growth and Endogenous growth?arrow_forward
- The Solow–Swan growth model with constant technology predicts: a. ongoing growth in per capita capital stock k b. an end to growth in per capita income y as countries reach their steady state c.ever-increasing growth in per capita income y d. ongoing growth in per capita income yarrow_forward3. An economy described by the Augmented Solow growth model has the following production function with populationgrowth (1+n) and technological growth (1+z):y =p(k)(a) Solve for the steady-state values of capital per capita and output as a function of s, n, z, and δ.(b) A developed country has a saving rate of 28 percent and a population growth rate of 1 percent per year. A lessdeveloped country has a saving rate of 10 percent and a population growth rate of 4 percent per year. In bothcountries, g = 0.02 and d = 0.04. Find the steady-state value of y for each country.(c) What policies might the less developed country pursue to raise its level of income? Graphically demonstrate howyour advised policy would increase income per capita (y).arrow_forwardIn the Solow growth model with population growth and technological progress, the growth rate of capital per effective worker is and the growth of output per worker is_ a. Positive, positive b. Zero, positive c. Zero, zero O d. Positive, zeroarrow_forward
- Explain the importance of research about the standard of living and the endogenous growth model in a country. Why the standard of living is related to Solow Growth model?arrow_forward1. 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.arrow_forwardFrom what we have learned from the Solow Growth Model, describe some policies that can improve a country's economic growth rate.arrow_forward
- In the Solow model with population growth and technological progress, the steady- state growth rate of total output is: On. 0. On+g. 0 g.arrow_forwardNow, in the Solow Model STEADY STATE of ANY ECONOMY that has positive rates of capital depreciation (10%), labor force growth (3%), and rise in worker effectiveness (2%), what is the rate of growth of: a. real GDP (Y) b. real GDP per worker (Y/L) c. real GDP per effective worker (Y/L*E)?arrow_forwardExplain about the potential limitations of the Solow growth model and endogenous growth model that will affect the standard of living of a country.arrow_forward
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