.In the Solow model of economic growth, a country with a higher rate of capital depreciation will, ceteris paribus, have a steady-state equilibrium with A. lower output per worker. B. higher capital to labour ratio. C. the same capital to labour ratio. D. more investment.
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10.In the Solow model of
A. lower output per worker.
B. higher capital to labour ratio.
C. the same capital to labour ratio.
D. more investment.
PROVIDE A BRIEF WRITTEN EXPLANATION
JUSTIFYING YOUR CHOICE.
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- 6.The standard Solow growth model assumes: a.The depreciation rate is a choice. b.The capital-output ratio is increasing in the level of per capita income in a country. c.The capital-output ratio is decreasing in the level of per capita income in a country. d.All of the above.4. Suppose that the depreciation rate increases. In the Solow growth model, determine the effects of this on the quantity of capital per worker and on output per worker in the steady state. Explain the economic intuition behind your results.11.The Harrod-Domar model of growth key ingredients are: a.The depreciation rate is endogenous to the level of per capita income. b.The capital-output ratio is decreasing in the level of per capita income in a country. c.The population growth rate is independent of the level of per capita income in a country. d.All of the above
- 1. Using the solow growth model, given y(K) = k^0.4, S=0.20, depreciation rate=0.04 and n=1%, a. What is the steady-state level of capital per worker? b. What is the steady-state of output per worker? c. What is the steady-state level of consumption per worker? 2. Now assume population growth is instead-0.5% (approximately the growth rate when every couple has 1.7 children), but that all other parameters stay the same. a. What is the new steady-state output per worker? Is it higher or lower than with faster population growth? [A numerical answer and a 1 sentence response is fine.] b. What is the new steady- state of consumption per worker? Is it higher or lower than with faster population growth? [A numerical answer and 1 sentence response is fine].8.Consider the empirical evidence on the Solow growth model when the population growth rate, depreciation and savings rate is the same across countries and when technological progress has the same rate in all countries. a.The Solow growth model cannot be tested for a large set of countries because it requires knowledge of each country’s steady state. b.The Solow growth model is supported by unbiased data for a small sample of countries over a long period of time. c.The Solow growth model is supported because they catch up with technological investments d.The Solow growth model is not supported by a large sample of countries over a short period of time.2. In the Solow growth model, suppose that the per-worker production function is given by y zk, with s = 0.25, d= 0.1, and n=0.02. (a) Suppose that in country A, z = 1. Calculate per capita income and capital per worker. (b) Suppose that in country B, z = 2. Calculate per capita income and capital per worker. (c) As measured by GDP per capita, how much richer is country B than country A? What does this tell us about the potential for differences in total factor productivity to explain differences in standards of living S across countries?
- 1. Draw a well-labeled graph that illustrates the steady-state of the Solow model with population growth. Use the graph to find what happens to steady-state capital per worker and income per worker in response to each of the following exogenous changes.a. A change in consumer preferences increases the saving rate.b. A change in weather patterns increases the depreciation rate.c. Better birth-control methods reduce the rate of population growth.4.The Solow growth model differs from the Harrod-Domar because: a.Assumes that depreciation rate and population growth are exogenous b.Assumes that the rate of technological progress varies from country to country. c.Predicts that permanent growth is achievable only through technological progress d.Predicts that poorer countries will grow faster than richer countries.3. An economy described by the Augmented Solow growth model has the following production function with populationgrowth (1+n) and technological growth (1+z):y =p(k)(a) Solve for the steady-state values of capital per capita and output as a function of s, n, z, and δ.(b) A developed country has a saving rate of 28 percent and a population growth rate of 1 percent per year. A lessdeveloped country has a saving rate of 10 percent and a population growth rate of 4 percent per year. In bothcountries, g = 0.02 and d = 0.04. Find the steady-state value of y for each country.(c) What policies might the less developed country pursue to raise its level of income? Graphically demonstrate howyour advised policy would increase income per capita (y).
- In the steady state in the Solow model, which is NOT one of the uses of new capital? a. To replace depreciating capital b. To replace capital exported to other countries c. To provide capital for wore out capital and new workers d. To provide capital for new workers3. Consider the Basic Solow growth model with a Cobb-Douglas production function and no technological change for the economy china. In this island economy, capital’s share α= 0.3, the annual depreciation rate on capital δ = 0.08 and the annual population growth rate n = 0.02. Suppose that this is the year 2017, and the economy is in the steady-state with GDP (Y) = 200 bananas, and capital stock K = 400 bananas. [Feel free to use any form of exponentiation that works best for you] Project the equilibrium level of GDP for 2050. Calculate the market value of fixed capital (K) in 2050 on a gross basis. Using the steady-state conditions, solve for the saving rate (s*) that is consistent with a stable steady-state.Solo growth model questions 1.) a. In a Solow growth model that is expressed in per capita terms, what happens to the marginal product of capital as an economy's capital/labor ratio increases? b. In a Solow growth model that is expressed in per capita terms, when an economy is in its steady state, what do you expect to happen to the capital-labor ratio? c. In a Solow growth model that is expressed in per capita terms, what happens to the capital/labor ratio when the savings rate rises? d.In a Solow growth model that is expressed in per capita terms, what happens to the capital/labor ratio when economywide productivity (this is our "A" variable) rises?