30. Consider a Solow Model where y = (Y/L) and k = (K/L) and y = k.5. L stands for the number of people and labor hours. The marginal propensity to save is .6. The depreciation rate is .25 (25%) and the population growth rate is .05 (5%). There is no technical change, growth in the efficiency of labor = 0%. Answer the following series of questions (a-m): a. What is the equation for break-even investment in this model? b. Calculate the steady state values of y, k, c (consumption per person), i (investment per person), and savings per person in the case where y = k5, depreciation rate is .25, population growth rate is .05, and marginal propensity to save is .6 1. y 2. k 3. c 4.1 5. total savings c. Sketch a graph of the steady state that you calculated in "2c" on the previous page, including the numerical values of y, k, and i. d. In this problem, what is the algebraic equation for the marginal product of capital, expressed as a function of k only? e. What are the values of the following variables when this economy is behaving according to the golden rule? 1. y 2. k 3. s (savings rate). 4. C 5.1

30. Consider a Solow Model where y = (Y/L) and k = (K/L) and y = k.5. L stands for the number of people and labor hours. The marginal propensity to save is .6. The depreciation rate is .25 (25%) and the population growth rate is .05 (5%). There is no technical change, growth in the efficiency of labor = 0%. Answer the following series of questions (a-m): a. What is the equation for break-even investment in this model? b. Calculate the steady state values of y, k, c (consumption per person), i (investment per person), and savings per person in the case where y = k5, depreciation rate is .25, population growth rate is .05, and marginal propensity to save is .6 1. y 2. k 3. c 4.1 5. total savings c. Sketch a graph of the steady state that you calculated in "2c" on the previous page, including the numerical values of y, k, and i. d. In this problem, what is the algebraic equation for the marginal product of capital, expressed as a function of k only? e. What are the values of the following variables when this economy is behaving according to the golden rule? 1. y 2. k 3. s (savings rate). 4. C 5.1

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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