Question

1. Suppose that the economy’s production function is Y = K.25 (eL).75 , that the saving rate, s, is equal to 21 percent, and the depreciation rate, d, is equal to 5 percent. Suppose further that the number of workers, L, grows at 1 percent a year and that the rate of technological progress, g, is 1 percent per year. Find the steady-state values of the following:

a. The capital stock per efficiency units of labor

b. Output per efficiency units of labor

c. The growth rate of output per efficiency units of labor

d. The growth rate of output per worker

e. The growth rate of output

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Question 1
Growth Suppose that the economy’s production function is: ?? =
?? 0.35(???? ) 0.65 and that the saving rate (s) is equal to 10%
and that the rate of depreciation (?) is equal to 2%. Further,
suppose that the number of workers grows at 5% per year and that
the rate of technological progress is 1% per year.
a. Find the steady-state values of:
• capital stock per effective worker
• output per effective worker
• consumption per...

Suppose an economy is described by the following production
function:
Y = K1/2 (EL)1/2
The savings rate in the economy is 0.40, population is growing
at a rate of 0.01, technological progress is growing at a rate of
0.01, and the depreciation rate is 0.02.
What is the steady state level of output per effective
worker?

Suppose an economy is described by the following production
function:
Y = K1/2 (EL)1/2
The savings rate in the economy is 0.40, population is growing
at a rate of 0.01, technological progress is growing at a rate of
0.01, and the depreciation rate is 0.02.
What is the steady state level of investment per effective
worker?

Suppose that the economy’s production function is given by
Y = K1/3N2/3
and that both, the savings rate s and the depreciation rate δ
are equal to 0.10.
a. What is the steady-state level of capital
per worker?
b. What is the steady-state level of output per
worker?
Suppose that the economy is in steady state and that, in period
t the depreciation rate increases permanently from 0.10 to
0.20.
c. What will be the new steady-state levels of
capital...

17. Solow growth The production function in your country is: Y =
K^0.5(LE)^0.5.
Your economy saves 24% of output each period, and 5% of the
capital stock depreciates each period. The population grows 2%
annually. Technology grows 1% annually. You begin with 1000 workers
and 1 unit of capital, and a tech- nology level equal to 1.
a) Write the production function in per-eective-worker terms, so
that per-effective-worker output (y = Y/LE ) is a function of
per-effective-worker capital (k=...

An economy has the following Cobb-Douglas production
function:
Y = Ka(LE)1-a
The economy has a capital share of 1/3, a saving rate of 24
percent, a depreciation rate of 3 percent, a rate of population
growth of 2 percent, and a rate of labor-augmenting technological
change of 1 percent. It is in steady state.
a. Does the economy have more or less capital than at the Golden
Rule steady state? How do you know? To achieve the Golden Rule
steady...

Assume that an economy is described by the Solow growth model as
below:
Production Function: y=50K^0.4 (LE)^0.6
Depreciation rate: S
Population growth rate: n
Technological growth rate:g
Savings rate: s
a. What is the per effective worker production function?
b. Show that the per effective worker production function
derived in part a above exhibits diminishing marginal returns in
capital per effective worker
C.Solve for the steady state output per effective worker as a
function of s,n,g, and S
d. A...

Suppose an economy is described by the following production
function:
Y = K1/2 (EL)1/2
The savings rate in the economy is 0.40, population is growing
at a rate of 0.01, technological progress is growing at a rate of
0.01, and the depreciation rate is 0.02.
What is the Golden Rule level of capital per effective worker?
(Use two decimal places)

Suppose the production of a country is Y =
K0.2(EL)0.8. And its depreciation rate is
0.07, population growth rate is 0.02, technology growth rate is
0.01, saving rate is 0.30.
Answer the following questions.
(a) What is the long-run growth rate of per
worker output?
(b) What is the long-run growth rate of
aggregate output?

In the Solow growth model of an economy with population growth
and technological progress, the steady-state growth rate in output
per worker is equal to:
(a) zero
(b) the rate of technological progress g.
(c) the growth rate of population n plus the rate of technological
progress g. (d) the rate of technological progress g minus the
growth rate of population n.
In the Solow growth model of an economy with population growth
and technological progress, the steady-state growth rate...

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