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(Neoclassical Growth Model). Consider the production function f(k) = Ak0.25, with A = 1, the saving...

(Neoclassical Growth Model). Consider the production function f(k) = Ak0.25, with A = 1, the saving rate s = 0.25, and the depreciation and population growth rates rates d = 0.15 and n = 0.10. The steady state level of capital per capita is k* = 1. For k0 = 0.5 and k0 = 1.5, as initial capital per capita, ll the values of per capita capital, output, the MPK, savings, required investment and the net capital accumulated (△k) in the tables below:

Period

kt

yt

MPK

Savings (S)

Required Investment (RI)

△k =S-RI

0

0.500

1

2

Period

kt

yt

MPK

Savings (S)

Required Investment (RI)

△k =S-RI

0

1.500

1

2

Note: k1 = k0 + △k0 and k2 = k1 + △k1. In your answers round to three decimal places.

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Answer #1

Now we fill the table below

Period kt yt MPK Savings(S) Req Investment(RI) =S-RI
0 0.5 0.5^0.25=0.84 0.25*(0.5)^(-0.75)=0.42 0.841*0.25=0.21 (0.25)*0.5=0.125 0.085
1 0.5+0.085=0.585 0.874 0.374 0.218 0.146 0.072
2 0.585+0.072=0.687 0.9 0.342 0.225 0.164 0.061
Period kt yt MPK Savings(S) Req Investment(RI) =S-RI
0 1.5 1.12 0.184 0.28 0.375 -0.095
1 1.5-0.095=1.405 1.09 0.193 0.272 0.351 -0.079
2 1.405-0.079 1.07 0.202 0.267 0.331 -0.064
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