Depict this situation in a graph What happens to steady state level of capital per capita in this situation? What happens to the level of capital per capita over time? Depict this in a graph and explain intuit
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Suppose a Solow economy is initially at its steady state k∗, and suddenly is hit by a decrease in the
Depict this situation in a graph
What happens to steady state level of capital per capita in this situation?
What happens to the level of capital per capita over time? Depict this in a graph and explain intuitively.
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- Q5 Suppose in a Solow model, we have the following parameter values: n = 0, s = 0.5, a = 0.3. There is no growth in the total factor productivity so that A, = A = 1. Moreover, we know that at time 0, the economy is at a steady state so that k = k, =1. Now imagine that a foreign power invaded this %3D country. 1% of the population was killed and another 14% of the population fleeded the country to avoid violence. Moreover, 15% of capital stocks were destroyed. All of this happens in period t=1. After that, the war ended and there was no more destruction of capital or loss of population (but the refugee permanently settled outside of the country and will never return0. What is the growth rate of per-capita output in period t =4?Consider the following numerical examples for the Solow Growth Model: Economy A z=1 s=0.5 F(K,N)=K0.3N0.7 n=0.01 d=0.1 Economy B z=1 s=0.2 F(K,N)=K0.3N0.7 n=0.01 d=0.1 In which economy is Consumption per capita higher in steady state? O Economy A O Economy B Not enough InformationConsider a Solow–Swan model with saving rate s = 0.4, labour force growth gL = 0.05, constant productivity A = 1, and depreciation? = 0.05. If output per worker is y = Y/L = 200 and capital per worker is k = K/L = 800, how would k evolve over time?Group of answer choices k is below its steady state and decreases towards the steady state k is above its steady state and decreases towards the steady statek is at its steady state and remains constant k is above its steady state and increases towards the steady state
- Consider an economy as per solow model, with a Cobb-Douglas production function with constant returns to scale with respect to K and L. Moreover, you know that the economy is producing 80 units of total output and the productivity parameter is equal to 1. If the depreciation rate is 10%, the investment rate is 10%, and there are 75 workers, the growth rate of GDP per person ____________. a) is equal to zero because the economy is at its steady state b) is negative because the economy is above its steady state c) is positive because the economy is below its steady state d)cannot be determinedUse the Solow model below to answer the question. Y Y3 Y₂ Y₁ K₁₁ K₂ K3 Y = Af(K,H) dk SY K Suppose that Y₁ is 1,475, Y₂ is 6,184, and Y3 is 10,992. The savings rate for this economy is 30% and the depreciation rate is 8.2%. If this economy is currently at a GDP of 1,475, what is the smallest amount of foreign aid which would move the economy up to a GDP of 10,992? Assume that all foreign aid becomes investment. Round your final answer to two decimal places.= 2. Consider a Solow growth model in which the production function is Yt AK²N₁¹/2, where A = 1. Moreover, assume that the depreciation rate is d = 0.02, the rate of population growth is n = 0.02, and the saving rate is s = = 0.2. a. Compute the value of the capital stock per worker in steady state. b. Draw a graph that represents the steady-state equilibrium of the model. c. Suppose that the capital-labor ration in year t is 90. What will the level of the capital- labor ratio be in year t+1? Will it increase or decrease in future periods? Explain. d. Compute the rate of change of the capital labor ratio between time t and t + 1. How does it compare to the rate of growth of the capital-labor ratio in steady state?
- 4. Assume an endogenous growth model with a production function that in per capita terms can be written as y = 0.8k. If the savings rate is s = 0.3, the rate of growth of population is n = 0.03, and the rate of depreciation is d = 0.1, how high is the rate of growth of output per capita? A. 14% B. 17% C. 13% D. 11% E. There is not enough information to calculate it.Population Growth and Technological Progress – Work It Out PLEASE WRITE ANSWERS CLEARLY An economy has a Cobb-Douglas production function: Y = K“(LE)'-a The economy has a capital share of 0.30, a saving rate of 42 percent, a depreciation rate of 4.00 percent, a rate of population growth of 5.25 percent, and a rate of labor-augmenting technological change of 3.5 percent. It is in steady state. b. Solve for capital per effective worker (k*), output per effective worker (y*), and the marginal product of capital. k* = y* = marginal product of capital =Suppose you are given the data for Brazil and Portugal. In Brazil, the saving rate is 0.1 and the depreciation rate is 0.1, while in Portugal the saving rate is 0.2 and the depreciation rate is 0.1. Using the Solow model, you conclude that in the steady state: a. Brazil has a higher capital-output ratio than Portugal b. Portugal has a higher level of output than Brazil c. Portugal has a higher capital-output ratio than Brazil d. Portugal and Brazil have the same capital-output ratio e. Brazil has a higher level of output than Portugal
- Sweden and Norway are two neighboring countries in Northern Europe with similar savings rates, population growth rates, technology growth rates, and depreciation rates. However, Norway differs from Sweden in that Norway has large deposits of oil all along its coast, which makes it very easy for Norway to produce large quantities of crude oil every year with relatively little capital and labor. a) Draw a Solow Growth diagram that compares Sweden and Norway. What is the main difference between the two countries in the diagram? b) According to the Solow Growth Model, which country would have a higher standard of living in the long run? Which country would have a higher growth rate of its standard of living in the long run? c) Suppose now that, in the long run, oil becomes obsolete and has no value because it is uneconomical relative to renewable energy sources like solar and wind power. What would this do to your Solow Growth diagram in part a? How would the standard of living in Norway…Production function is given by Y = Ka(AN)'¯ª, where a=2/3. Initially, the saving rate was equal to s and the economy was in the steady state. Use the Solow growth model to answer the following questions. (Please fill in numbers; use a yomma as a decimal separator: 10,5) 1. In order to increase capital per unit of effective labor in the steady state by a factor of 27 (i.e. to make it 27 times larger), the rate of saving needs to increase by a factor of 2. In order to increase output per unit of effective labor in the steady state by a factor of 4 (i.e. to make it 4 times larger), the rate of saving needs to increase by a factor of 3. Suppose that s=25 percent, the rate of depreciation of capital is equal to 5 percent, the rate of technological progress is equal to 1 percent, and the rate of population growth is equal to 0,25 percent, a=2/3. The steady state level of investment per unit of effective labor is equal toIn the Solow model, if investment per-worker initially exceeds saving per-worker, how isthe steady-state capital per worker reached? Draw a graph to support your answer
