Question

Discuss and illustrate graphically how a decrease in saving rate will affect the steadystate level of capital and output. Also illustrate graphically the transition of capitaland output fromtheir old steady state level to new one.

( Solow Model, please graph (two of them) and explain in details)

Answer #1

decrease in savings basically lead to level effect, the level of per cpita output is decreased in equilibrium,

as savings are decreased the investment will decrease relative to the depreciation thus the steady state of capital will start to fall and also the steady stats of output,

the balance is restored at a lower level of steady state of output and capital,

in the digram on Y asix there is output and we can see that steady state of output will also decrease,

1. Graphically illustrate the Solow model in equilibrium. Label
completely. Explain the model.
2. Beginning in a state of equilibrium in the Solow model,
graphically illustrate the destruction from a sizeable portion of
the capital stock from a war. In a second graph, graphically
illustrate the long-run equilibrium.

As an economy adjusts to a decrease in the saving rate,
according to Solow model, we would expect output per worker
-none of the other answers is correct.
-to decrease at a permanently higher rate.
-to return to its original level.
-to increase at a permanently higher rate.
-to decrease at a constant rate and continue decreasing at that
rate in the steady state.

Decrease in saving rate in Solow model. Please explain with
graphs

Hi,This question is very important and I need a quick response
from you today/br/Ha
Consider a version of the Solow model where the population
growth rate is 0.05. There is no technological progress. Capital
depreciates at rate ? each period and a fraction ? of income is
invested in physical capital every period. Assume that the
production function is given by:
?t = ?t1/2
?t1/2 ,
where ?t is output, ?t is capital and
?t is labour.
a. Derive an...

In the solow model, how does increasing or decreasing population
growth affect the graph? How does the saving rate affect the graph?
Please explain and show examples.

Use the IS-LM model to graphically illustrate the impact of a
sudden decrease in demand for money (due to an increase in the use
of internet banking) on the output and interest rate in an economy
in the short run. Write down the impact on Y, C, U and
I.
Be sure to label: i. the axes; ii. the curves; iii. the initial
equilibrium levels; iv. the direction the curves shift; and v. the
new short-run equilibrium.

Assume that a war reduces a country's labor force but does not
directly affect its capital stock. If the economy was in a steady
state before the war and the saving rate does not change after the
war, then, over time, capital per worker will ______ and output per
worker will ________ as it returns to the steady rate
a) decline, increase
b) increase, increase
c) decline, decrease
d) increase, decrease
Please explain why

Which of the following statements about the Solow growth model
is FALSE?
A. The higher steady-state capital per capita, the higher the
output/income per capita.
B. The higher output/income per capita, the higher consumption
per capita.
C. Golden-rule capital per capita must be a steady state, but
not all steady-state is also a golden-rule.
D. Golden-rule capital per capita can be achieved by setting
the saving rate at the appropriate level.

Consider how unemployment would affect the Solow growth model.
Suppose that output is produced according to the production
function Y = Kα [(1 – u)L]1-α where K is
capital, L is the labor force, and u is the natural rate of
unemployment. The national saving rate is s, the labor force grows
at rate n, and capital depreciates at rate δ.
a. Write a condition that describes the golden rule
steady state of this economy.
b. Express the golden rule...

Question #1: The Basic Solow Model
Consider an economy in which the population grows at the rate of
1% per year. The per worker production function is y = k6, where y
is output per worker and k is capital per worker. The depreciation
rate of capital is 14% per year. Assume that households consume 90%
of their income and save the remaining 10% of their income.
(a) Calculate the following steady-state values of
(i) capital per worker
(ii) output...

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