Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Chapter 6, Problem 4RQ
To determine
Analysis of Solow model
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Consider an economy that begins in a steady-state. Then an asteroid destroys two third of the capital stock. Using Solow model, draw a graph to explain how the economy behaves over time. Draw another graph indicating how output progresses over time, and demonstrate what happens to the level and growth rate of per capita GDP. By how much does the output decline when the capital stock falls by two third?
Please include a description of what's happening on the graphs.
What can the Solow model tell us about growth in the short term and in the long term? What is different between the Solow model and the endogenous growth model?
when a country adds capital what is it doing to its productivity and GDP? Which variable in the Solow Model equation is it changing?
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- Draw a well- labeled graph that illustrates the steady state of the Solow model with population growth. Use the graph to find what happens to steady-state capital per worker and income per worker in response to each of the following exogenous changes. A change in weather patterns increases the depreciation rate. b. Better birth-control methods reduce the rate of population growth.arrow_forwardWhat are the characteristics of a steady state in the Solow growth model?arrow_forwardWhat are Critisms or the drawbacks of the Solow Growth Model? What types of economical growth that it does not account for?arrow_forward
- If climate change impacts (e.g., increased heat waves, droughts, wildfires, etc.) decrease the economy's technology level A, then, through the lens of the Solow growth model (and assuming the economy was originally in a steady-state), holding all else constant, we would expect it toarrow_forwardAssume a country is in steady state. Explain what will happen id a disaster hit the country and destroyed 40% of its capital stock, but nobody is killed. Draw the diagram of solow model.arrow_forwardplease write in brief detail the meaning of “steady-state” and “balanced growth path” in the Solow Growth Model.arrow_forward
- When a country adds capital what is it doing to its productivity and GDP? Which variable in the Solow Model equation is it changing? When a country adds ideas what is it doing to its productivity and GDP? Which variable in the Solow Model equation is it changing?arrow_forwardDefine the steady state in solow growth model. Explain in a manner that i can understand.arrow_forwardAssume that an economy is described by the Solow model in the long run. The rate of population growth in this economy is n technological growth is g rates of total GDP, GDP per worker, and GDP per effective worker? 0.01 and the rate of 0.02. What are the long-run (steady state) growth rates of total GDP, GDP per worker, and GDP per effective worker?arrow_forward
- Define and explain "steady state" in the Solow model. Assume that the economy initially is in the steady state. Analyze the short-run and long-run effects of a change in the population growth rate (n) on per capita GDP growth rates and levels in the Solow model, everything else equalarrow_forwardQuestion 3 Suppose that a country is in a steady-state (as described by the Solow model), when numerous tornados hit and destroy much of their capital stock, while nothing else is affected. What happens to its steady-state rate of growth?arrow_forward2.Define the steady-state growth rate in the Solow model either graphically or mathematically. Using that tool, show how faster population growth affects the steady state? Explain why the answer you got makes sense.arrow_forward
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