The depreciation rate of capital in the US is 8 = 0.043 and the population growth rate is g₁ = 0.007. Moreover, Y/K is around 0.35 on average over the last 60 years in the US (see the graph. below). If the saving rate is s= 0.2 in the US, then find the long-run growth rate of average income in the US according to the Solow's model. (Note: To cross-check Compare your theoretical result with the actual growth rate of average income in the US which is 2%.)

The depreciation rate of capital in the US is 8 = 0.043 and the population growth rate is g₁ = 0.007. Moreover, Y/K is around 0.35 on average over the last 60 years in the US (see the graph. below). If the saving rate is s= 0.2 in the US, then find the long-run growth rate of average income in the US according to the Solow's model. (Note: To cross-check Compare your theoretical result with the actual growth rate of average income in the US which is 2%.)

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter5: Business And Economic Forecasting

Section: Chapter Questions

Problem 1.3CE: Logarithms are especially useful for comparing series with two divergent scales since 10 percent...

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