Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Question
Chapter 6, Problem 4AP
To determine
To describe: The steady-state values of per worker capital, output and consumption is to be calculated. The effect on the steady state of an increase in h is to be explained.
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Students have asked these similar questions
An economy has the per-worker production function yt=f(kt)=4kt)0.4,
where yt is the output per worker and kt is the capital-labor ratio. The depreciation rate is 0.15, and the population growth rate is 0.04.
Saving is St=0.5Yt,
where St is total national saving and Yt is total output.
The slope of the per worker production function is given by
f' (kt)=1.6kt-0.6 .
What is the steady state value of capital-labor ratio, k*? Round your answer to at least 2 decimal places.
Assume that a country's per-worker production is y = k/2, where y is output per worker and k is
capital per worker. Assume also that 10 percent of capital depreciates per year (= 0.10) 2 and
there is no population growth or technological change.
a. If the saving rate (s) is 0.4, what are capital per worker, production per worker, and
consumption per worker in the steady state?
b. Solve for steady-state capital per worker, production per worker, and consumption per
worker with s = 0.6.
c. Solve for steady-state capital per worker, production per worker, and consumption per
worker with s = 0.8.
Use the Solow model below to answer the question.
Y
Y3
Y₂
Y₁
K₁₁
K₂
K3
Y = Af(K,H)
dk
SY
K
Suppose that Y₁ is 1,475, Y₂ is 6,184, and Y3 is 10,992. The savings rate for this economy is 30%
and the depreciation rate is 8.2%.
If this economy is currently at a GDP of 1,475, what is the smallest amount of foreign aid which
would move the economy up to a GDP of 10,992?
Assume that all foreign aid becomes investment. Round your final answer to two decimal places.
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