Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
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Question
Chapter 16, Problem 4E
a)
To determine
Growth rate for consumption will households choose.
b)
To determine
Growth rate for consumption will households choose if β = 0.95.
c)
To determine
The value taken as the real interest rate.
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Consider an economy with a Cobb-Douglas production function with α = 1/3 that
begins in steady state with a growth rate of technological progress of g of 2 percent.
Consider what happens when g increases to 3 percent.
(a) What is the growth rate of output per worker before the change? What happens
to this growth rate in the long run?
(b) Perform a growth accounting exercise for the economy, decomposing the growth
rate in output per capita into components contributed by capital per capita growth
and technology growth. What is the contribution of the change in g to output
per capita growth according to this formula?
(c) In what sense is the growth accounting result in part b producing a misleading
picture of this experiment? Explain why this is the case.
Suppose that the economy is summarized by the following:
Technology (Production Function): Yt = 10 (Kt)0.3 (Lte)0.7
Consumption function: Ct = 0.8Yt
Depreciation rate: 8% (i.e. δ= 0.08)
Population growth: 2% (i.e. n = 0.02)
Technological growth: 4% (i.e. g = 0.04)
1. Assuming that in 2013 the US economy is in the steady state and L2013 = Le2013 = 8, what is the value of ke2014, ye2014, ce2014 , k2014, y2014, and c2014 ?
7. 1. Consider a neoclassical growth economy described by the following.•Yt = K0.3t ·L0.7t (aggregate production function)•s = 0.35 (saving rate)•δ = 0.10 (depreciation rate)•n = 0.01 (population growth rate)•L1 = 120 (initial population)•K1 = 160 (initial capital stock)•g = 0 (technological growth rate)Compute K, Y , k, y, and c for the first three periods. Please report numerical answersto two decimal points.
(a) K1 = ; Y1 = ; k1 = ; y1 = ; c1 =(b) K2 = ; Y2 = ; k2 = ; y2 = ; c2 =(c) K3 = ; Y3 = ; k3 = ; y3 = ; c3 =
Chapter 16 Solutions
Macroeconomics (Fourth Edition)
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