Homework Answers
In the economics the saving rate is said to be as the Golden rule and in this the rate of saving is being maximizes the competition having the growth or the steady state .
It can be explained as that let us considered the capital = y which is equal to then f(k) .
The main Example of the saving rate is Solow Growth Model .
This can be explained with the help of the derivation:-
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(15 Points) What saving rate maximizes output per worker for each country? What saving rate maximizes...
1. Country A and country B both have the production function Y = F(K,L)= VKL. (5...
1. Country A and country B both have the production function Y = F(K,L)= VKL. (5 Points) Does this production function have constant returns to scale? Explain. (5 Points) What is the per-worker production function, y=f(k)? (10 Points) 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 10 percent of output each year and country B saves 20 percent of output each year. Using...
1. Assume that an economy described by a Solow model has a per-worker production function given...
1. Assume that an economy described by a Solow model has a per-worker production function given by y- k05, where y is output per worker and k is capital stock per worker (capital-labor ratio). Assume also that the depreciation rate δ is 5%. This economy has no technological progress and no population growth (n 0). Both capital and labor are paid for their marginal products and the economy has been in a steady state with capital stock per worker at...
Solow Diagram and Transition Paths. Assume that initially an economy is saving at a rate that...
Solow Diagram and Transition Paths. Assume that initially an economy is saving at a rate that exceeds its golden rule saving rate and that the economy is in a steady state equilibrium. Suppose that the economy increases its saving rate away from the golden rule saving rate. (a) Construct a Solow diagram that shows the effects on the steady state values of capital, output, and investment per effective worker. (b) Does steady state consumption per eective worker rise or fall?...
1. Let's review the setup of the Solow growth model with saving rate s, constant population...
1. Let's review the setup of the Solow growth model with saving rate s, constant population growth rate n, and constant technology growth rate g Kt+1(1-8)K Lt+ 1 = (1 + n) Et+1-(1+g)E a) b) c) What is the steady-state capital and output per effective worker? (5pts) Solve for the golden rule level of capital. What is the saving rate then? (5pts) Many health experts have argued that malnutrition leads to reduced work capacity. Suppose in the Solow model, this...
1. Let's review the setup of the Solow growth model with saving rate s, constant population...
1. Let's review the setup of the Solow growth model with saving rate s, constant population growth rate n, and constant technology growth rate g Kt+1(1-8)K Lt+ 1 = (1 + n) Et+1-(1+g)E a) b) c) What is the steady-state capital and output per effective worker? (5pts) Solve for the golden rule level of capital. What is the saving rate then? (5pts) Many health experts have argued that malnutrition leads to reduced work capacity. Suppose in the Solow model, this...
Consider an economy described by the following production function: Y=K0.2L0.8 Suppose the depreciation rate is 10%....
Consider an economy described by the following production function: Y=K0.2L0.8 Suppose the depreciation rate is 10%. Explain what the golden rule level of capital is. For this economy, calculate the golden rule level of capital per worker, output per worker, depreciation per worker and consumption per worker. Plot the results obtained in (b) above. Calculate the saving rate that would give the golden rule level. Explain what happens to the consumption level if the saving rate departs from the one...
Suppose you are a policy maker who wants to select a level of saving rate that would maximize consumption per worker. Given that output per worker is a square root of capital per worker, and 10% of ca...
Suppose you are a policy maker who wants to select a level of saving rate that would maximize consumption per worker. Given that output per worker is a square root of capital per worker, and 10% of capital depreciates every year. (a) Construct a table with the following saving rates: 0.3, 0.4, 0.5 and 0.6. For each saving rate, fill the table with values for capital per worker, output per worker, depreciation per worker, consumption per worker and marginal product...
4. Which of the following will cause an increase in output per worker in the long...
4. Which of the following will cause an increase in output per worker in the long run? A. an increase in the saving rate ( B. a reduction in the depreciation rate C. an increase in the stock of human capital D. an improvement of technology 5. Suppose, due to a military conflict, that a country experiences a large reduction in its capital stock. Assume no other effects of this event on the economy. Which of the following will tend...
If a war destroys a large portion of a country's capital stock but the saving rate...
If a war destroys a large portion of a country's capital stock but the saving rate is unchanged, the Solow model predicts that output will grow and that the new steady state will approach: O the same level of output per person as before. O a higher level of output per person than before. O a lower level of output per person than before. O the Golden Rule level of output per person. Exhibit: Steady-State Consumption II Sk* Sk* f**...
The change of inputs and production function determine the level of output in the long run....
The change of inputs and production function determine the level of output in the long run. Suppose an economy described by the Solow model utilize capital and labour in production process which technology parameter ofa=1/2. Assuming that population has zero growth rate and technology is constant (A=1): a. Write down production function for this country, determine output per worker as function of capital per worker and explain the steady state of capital condition (6 POINTS) b. If 8 and s...
1. Country A and country B both have the production function Y = F(K,L)= VKL. (5 Points) Does this production function have constant returns to scale? Explain. (5 Points) What is the per-worker production function, y=f(k)? (10 Points) 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 10 percent of output each year and country B saves 20 percent of output each year. Using...
1. Assume that an economy described by a Solow model has a per-worker production function given by y- k05, where y is output per worker and k is capital stock per worker (capital-labor ratio). Assume also that the depreciation rate δ is 5%. This economy has no technological progress and no population growth (n 0). Both capital and labor are paid for their marginal products and the economy has been in a steady state with capital stock per worker at...
1. Let's review the setup of the Solow growth model with saving rate s, constant population growth rate n, and constant technology growth rate g Kt+1(1-8)K Lt+ 1 = (1 + n) Et+1-(1+g)E a) b) c) What is the steady-state capital and output per effective worker? (5pts) Solve for the golden rule level of capital. What is the saving rate then? (5pts) Many health experts have argued that malnutrition leads to reduced work capacity. Suppose in the Solow model, this...
1. Let's review the setup of the Solow growth model with saving rate s, constant population growth rate n, and constant technology growth rate g Kt+1(1-8)K Lt+ 1 = (1 + n) Et+1-(1+g)E a) b) c) What is the steady-state capital and output per effective worker? (5pts) Solve for the golden rule level of capital. What is the saving rate then? (5pts) Many health experts have argued that malnutrition leads to reduced work capacity. Suppose in the Solow model, this...
4. Which of the following will cause an increase in output per worker in the long run? A. an increase in the saving rate ( B. a reduction in the depreciation rate C. an increase in the stock of human capital D. an improvement of technology 5. Suppose, due to a military conflict, that a country experiences a large reduction in its capital stock. Assume no other effects of this event on the economy. Which of the following will tend...
If a war destroys a large portion of a country's capital stock but the saving rate is unchanged, the Solow model predicts that output will grow and that the new steady state will approach: O the same level of output per person as before. O a higher level of output per person than before. O a lower level of output per person than before. O the Golden Rule level of output per person. Exhibit: Steady-State Consumption II Sk* Sk* f**...
The change of inputs and production function determine the level of output in the long run. Suppose an economy described by the Solow model utilize capital and labour in production process which technology parameter ofa=1/2. Assuming that population has zero growth rate and technology is constant (A=1): a. Write down production function for this country, determine output per worker as function of capital per worker and explain the steady state of capital condition (6 POINTS) b. If 8 and s...
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