6. Study Questions and Problems #6 Complete the following sentences to explain why it is so difficult for poor LDCs to generate investment in capital in order to increase productivity and growth and, therefore, improve their standard of living. It is difficult for poor LDCs to generate investment in capital in order to increase productivity and growth because their savings rate is leads to rates of investment, and many wealthy individuals in poor LDCs choose to save their money in A . This 6. Study Questions and Problems #6 Complete the following sentences to explain why it is so difficult for poor LDCs to generate investment in capital in order to increase p growth and, therefore, improve their standard of living. It is difficult for poor LDCs to generate investment in capital in order to increase productivity and growth because their savings rate is leads to rates of investment, and many wealthy individuals in poor LDCs choose to save their money in low ity and high This

6.5 Exercises Exercise 6.1 (Technological Progress and Long-Run Growth). Consider a Solow economy with population growth and technological progress. The evolution of the capital stock per efficiency unit of labor, denoted k1, is given by the law of motion (1+n)(1+ g)kt+1 = (1 – 8)kt +of(kt). Capital per efficiency unit of labor is defined as k, = Kt/(LEt), where Kt denotes the stock of physical capital, L, denotes population, and E is a tech- nological factor. Population grows at the rate n and the technological factor grows at the rate g. The subscript t denotes time, measured in years. The parameters d E (0, 1) and o > 0 denote, respectively, the depreciation rate of capital and the savings rate. The function f(k;) represents the produc- tion technology. Specifically, let Y, denote output and yt = Yt/(LEt) denote output per efficiency unit of labor. Then yt = f(kt). Assume that f(kt) = /k. 1. Find the steady-state stock of capital per efficiency unit of labor, de- noted k*, as a…

QUESTION 1 Assume a Cobb-Douglas production with capital share 1/3; total factor productivity equal to 1, total population in an economy is equal to 1, depreciation rate is 5 percent and saving rate is 10 percent. Then the steady-state level of capital is about:  a. 0.8 b. 1.6 c.1.3 d.2.8 e. 0.3Question 2  If a natural disaster destroys a large portion of a country's capital stock but the saving and depreciation rates are unchanged, the Solow model predicts that the economy will grow and eventually reach:a. A lower steady-state level of output than it would have before the disasterb. None of these answers is correctC. The same steady-state level of output as it would have before the disasterd. A higher steady-state level of output than it would have before the disaster e. Not enough information is given QUESTION 3 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 saving rate is 0.2 and the…

Question 7 What is meant by economic growth and why is it one of the most important goals macroeconomists seek to achieve? In your explanation, show the relationship between production, consumption, and investment in periods of economic growth?