Need help.. Consider a Solow economy where the technology is Cobb-Douglas and takes the form1-1of Y; = AțK?-° Nº , the saving rate is constant at s, the population growth rate is constantat n, and assume that the technology coefficient At = A for all t. The aggregate capitallaw of motion is Kį = I – 8Kt.(a)Write down the fundamental growth equation of the Solow model in terms of thecapital evolution per person.Use the fundamental equation to solve for the steady state capital per person.(b)And compute the marginal product of capital.(c)Consider the following three cases. Describe how the changes affect the break-even curve and the actual investment curve in the baseline diagram for the Solowmodel (corresponding to the fundamental growth equation)1) The population growth rate falls2) The depreciation rate rises3) The capital share in the production function, 1– 0, rises(d) Solve for the optimal capital and consumption per person under the golden-rule.What saving rate is needed to yield the golden-rule capital stock?

Given,In the Solow economy, the CD production function is:Where,

Consider a Solow economy where the technology is Cobb-Douglas and takes the form of Y₁ = A₁K¹²¯º Nê, the saving rate is constant at s, the population growth rate is constant 1-0 at n, and assume that the technology coefficient A₁ = A for all t. The aggregate capital law of motion is K₁ = It - 8Kt. (a) (b) (c) Write down the fundamental growth equation of the Solow model in terms of the capital evolution per person. Use the fundamental equation to solve for the steady state capital per person. And compute the marginal product of capital. Consider the following three cases. Describe how the changes affect the break- even curve and the actual investment curve in the baseline diagram for the Solow model (corresponding to the fundamental growth equation) 1) The population growth rate falls 2) The depreciation rate rises 3) The capital share in the production function, 1 – 0, rises (d) Solve for the optimal capital and consumption per person under the golden-rule. What saving rate is needed to yield the golden-rule capital stock?

Consider a Solow economy where the technology is Cobb-Douglas and takes the form of Y₁ = A₁K¹²¯º Nê, the saving rate is constant at s, the population growth rate is constant 1-0 at n, and assume that the technology coefficient A₁ = A for all t. The aggregate capital law of motion is K₁ = It - 8Kt. (a) (b) (c) Write down the fundamental growth equation of the Solow model in terms of the capital evolution per person. Use the fundamental equation to solve for the steady state capital per person. And compute the marginal product of capital. Consider the following three cases. Describe how the changes affect the break- even curve and the actual investment curve in the baseline diagram for the Solow model (corresponding to the fundamental growth equation) 1) The population growth rate falls 2) The depreciation rate rises 3) The capital share in the production function, 1 – 0, rises (d) Solve for the optimal capital and consumption per person under the golden-rule. What saving rate is needed to yield the golden-rule capital stock?

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter20: Economic Growth In The Global Economy

Section: Chapter Questions

Problem 5P

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