Question

Please don't copy other expert's answer. I'm re-posting it because I think that is not right or not enough. Please someone who really knows the answer answer to this problem.

2. (A simulated economy) Let Y,-F(K, Lt-AK L. The discrete time version of the capital accumulation equation is given by Lo-1 and labor grows at a rate of n-0.01. A-1. K0 0.01 and δ 0.07 c) Assume the economy is in a steady state and s0.3. Explain what happens to consumption over time after s increases to s 0.33. d) Do the same as in part (c) but assuming that s increases to s 0.5

Answer 1

Answev cniventhat The discrete time vesion of the capital accumulation eation is given by S=0.07 (a) S=0.2 keep colu m n A for time periad Column B For Canstant A Column c for vaviable Column O For vaviable kt.5 Column E For vavį able L Column F For vavia blc Lt 13 Column For vaviable Ye LO 0.2/suu3

-/- changc in s'changcFvom's' changc From s' changc -rod * char 0.3 to o 333lo-/. o 33 to o s-S2/ changeiny, Change in yi change in y change in y, l9 20- 2 3