ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Hi! Stuck with that assigment if anyone ca help !
An economy is characterized by the following relations:
Y = F(K,AL) = Kª(AL)1-a : Production function
f(k) = F(k, 1) : Functional transformation with capital per capita with labor-augmenting
technology.
f'(k) : Marginal productivity of capital.
K+1 = K, +1 - 8K : Capital accumulation
Y = C +1→I =Y – C = S = sY : Equilibrium and S=I relation
x =
AL
K
Ex: k =
Y: output, K: capital, L: labor, a: share of capital income, 8: depreciation rate, s: saving rate
:x is a variable such as y, k, c, i considering the labor-augmenting technology.
y = etc..
AL
Axt
dlnxt
%3D
: Growth rate of a variable
Xt
dt
ALt
ΔΑ
= g : Exogenously determined growth rate of labor and technology.
= n,
At
Lt
(a) Derive the Solow model equation: Ak, = sf (k¿) - (n +g*+ 8)k¢
%3D
(b) Illustrate the Solow model graphically. How does this economy arrive at the steady state?
Answer with this case: ko <k* (ko: initial k , k*: k in the steady state )
(c) Graphically show the effect of increase in saving rate (s → s', s< s')
(d) Show time paths of output per capita, consumption per capita, and investment per capita.
ỹ =, č = , i = the technology term is extracted out.
(e) Summarize what the Solow model tells us. Comment at least two limitations of the model.
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Transcribed Image Text:Hi! Stuck with that assigment if anyone ca help ! An economy is characterized by the following relations: Y = F(K,AL) = Kª(AL)1-a : Production function f(k) = F(k, 1) : Functional transformation with capital per capita with labor-augmenting technology. f'(k) : Marginal productivity of capital. K+1 = K, +1 - 8K : Capital accumulation Y = C +1→I =Y – C = S = sY : Equilibrium and S=I relation x = AL K Ex: k = Y: output, K: capital, L: labor, a: share of capital income, 8: depreciation rate, s: saving rate :x is a variable such as y, k, c, i considering the labor-augmenting technology. y = etc.. AL Axt dlnxt %3D : Growth rate of a variable Xt dt ALt ΔΑ = g : Exogenously determined growth rate of labor and technology. = n, At Lt (a) Derive the Solow model equation: Ak, = sf (k¿) - (n +g*+ 8)k¢ %3D (b) Illustrate the Solow model graphically. How does this economy arrive at the steady state? Answer with this case: ko <k* (ko: initial k , k*: k in the steady state ) (c) Graphically show the effect of increase in saving rate (s → s', s< s') (d) Show time paths of output per capita, consumption per capita, and investment per capita. ỹ =, č = , i = the technology term is extracted out. (e) Summarize what the Solow model tells us. Comment at least two limitations of the model.
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