Question

Bradford Delong: Economic Convergence Assume that two countries produce only with labor and capital and have...

Bradford Delong: Economic Convergence

Assume that two countries produce only with labor and capital and have the same savings and depreciation rate. Further assume that there is no population growth or innovation. One country has a low current level of capital per worker, the other one has a high level of capital per worker. Neither one of them has reached its steady state equilibrium yet. Use a suited diagram drawn from the Solow/Swan model to illustrate this situation. Which country will grow faster and why?

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Bradford Delong: Economic Convergence Assume that two countries produce only with labor and capital and have...
Bradford Delong: Economic Convergence Assume that two countries produce only with labor and capital and have the same savings and depreciation rate. Further assume that there is no population growth or innovation. One country has a low current level of capital per worker, the other one has a high level of capital per worker. Neither one of them has reached its steady state equilibrium yet. Use a suited diagram drawn from the Solow/Swan model to illustrate this situation. Which country...
Suppose there are two very similar countries (call them E and F). Both countries have the...
Suppose there are two very similar countries (call them E and F). Both countries have the same population and neither is experiencing population growth (that is, N is identical and constant in both countries). Both countries depreciate capital at the same rate, the both have the same savings rate, they both have the same technology, and there is no technological progress. Suppose that currently both countries are in steady state, when an earthquake destroys half of the capital stock of...
Suppose that two countries are exactly alike in every respect except that population grows at a...
Suppose that two countries are exactly alike in every respect except that population grows at a faster rate in country A than in country B. Which country will have the higher level of output per worker in the steady state? Illustrate graphically. (a) In which country is the level of steady-state output per worker larger? Explain. (b) In which country is the steady-state growth rate of output per worker larger? (c) In which country is the growth rate of steady-state...
Some economists have suggested that the adoption of computer technology involves faster rates of capital depreciation....
Some economists have suggested that the adoption of computer technology involves faster rates of capital depreciation. Assume that there is no technological progress (aside from the change in the depreciation rate). Using the Solow-Swan model, explain carefully the short-term and long-term effects (steady-state) on GDP per worker and capital per worker.
2. The Solow-Swan Model a) Consider an economy that is initially in a steady state equilibrium....
2. The Solow-Swan Model a) Consider an economy that is initially in a steady state equilibrium. Assume that in this equilibrium it has a saving rate of 50 per cent and a depreciation rate of 2 per cent. Further assume that the population is constant and that the level of output produced can be represented by the following production function: Y = AKαL 1−α where A = 1 and α = 0.5. Use the Solow-Swan model to determine the level...
Consider two countries: Country A and Country B. Each country has the following Cobb-Douglas type production...
Consider two countries: Country A and Country B. Each country has the following Cobb-Douglas type production function: Country A: Y = (K0.5)(EL)0.5 Country B: Y = (K0.7)(EL)0.3 Unfortunately, your knowledge of Country A is a bit limited. You have pieces of information, but you don’t know the entire picture. o Savings rate (s): unknown for Country A and 14.29% for Country B o Steady-state value of capital per effective worker: unknown for both countries, but you have heard that Country...
Assume that an economy is described by the Solow growth model as below: Production Function: y=50K^0.4...
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...
The economies of two countries, Thrifty and Profligate, have the same production functions and depreciation rates....
The economies of two countries, Thrifty and Profligate, have the same production functions and depreciation rates. There is no population growth in either country. The economies of each country can be described by the Solow growth model. The saving rate in Thrifty is 0.3. The saving rate in Profligate is 0.05. (a) Which country will have a higher level of steady-state output per worker? (b) Which country will have a higher growth rate of output per worker in the steady...
Country A and country B both have the production function. ?=?(?,?)=?^1/2*?^1/2 c. Assume that neither country...
Country A and country B both have the production function. ?=?(?,?)=?^1/2*?^1/2 c. Assume that neither country experiences population growth or technological progress and that 5 percent of capital depreciates each year. Assume further that country A saves 12 percent of output each year and country B saves 24 percent of output each year. Using your answer from part bv(per worker production funtion is y=f(k) and the steady-state condition that investment equals depreciation, find the steady-state level of capital per worker...
Suppose two countries, Farmland and Techland, use only capital and labor to produce two goods, Grain...
Suppose two countries, Farmland and Techland, use only capital and labor to produce two goods, Grain (G) and Cars (C). Farmland has 2,050 units of capital and 916 units of labor, and Techland has 816 units of capital and 270 units of labor. In Techland, there are 366 units of capital and 135 units of labor employed in the Grain industry. In Farmland, there are 926 units of capital and 618 units of labor employed in the Grain industry. A.    ...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT