Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 7RQ
To determine
To Analyze:Different scenarios in Solow model.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Suppose a country has a capital-output ratio equal to 10, a savings rate equal to 20% of GDP, capital that lasts on average 100 years and population growth of 1% per year. If we assume the country is at its steady state and production is given by the Solow model with labor-augmenting technological change, so Y = K^a(EL)^(1 – a), then the growth rate of technology as measured by the growth rate of efficiency workers is
0%
1%
3%
2%
4%
Suppose a country has a capital-output ratio equal to 10, a savings rate equal to 20% of GDP, capital that lasts on average 100 years and population growth of 1% per year. If we assume the country is at its steady state and production is given by the Solow model with labor augmenting technological change, so Y = Kª(Ex L)¹-a, then the growth rate of technology as measured by the growth rate of efficiency workers is
3%
1%
4%
0%
2%
The Solow model without exogenous productivity growth predicts that rich countries with more capital will grow faster than poor countries with less capital, assuming other economic conditions are equal. Is this statement true or false? Explain.
Knowledge Booster
Similar questions
- The amount of education the typical person receives varies substantially among countries. Suppose you were to compare a country with a highly educated labor force and a country with a less educated labor force.Assume that education affects only the level of the efficiency of labor. Also assume that the countries are otherwise the same: they have the same saving rate, the same depreciation rate, the same population growth rate, and the same rate of technological progress. Both countries are described by the Solow model and are in their steady states. What would you predict for the following variables?a. The rate of growth of total income.b. The level of income per worker.c. The real rental price of capital.arrow_forwardThe amount of education the typical person receives varies substantially among countries. Suppose you were to compare a country with a highly educated labor force and a country with a less educated labor force. Assume that education affects only the level of the efficiency of labor. Also assume that the countries are otherwise the same: they have the same saving rate, the same depreciation rate, the same population growth rate, and the same rate of technological progress. Both countries are described by the Solow model and are in their steady states. What would you predict for the following variables? a. The rate of growth of total income. b. The level of income per worker. c. The real rental price of capital. d. The real wage.arrow_forwardThe amount of education the typical person receives varies substantially among countries. Suppose you were to compare a country with a highly educated labor force and a country with a less educated labor force.Assume that education affects only the level of the efficiency of labor. Also assume that the countries are otherwise the same: they have the same saving rate, the same depreciation rate, the same population growthrate, and the same rate of technological progress. Both countries are described by the Solow model and are in their steady states. What would you predict for the following variables? a)The real wage.arrow_forward
- Consider the following Solow diagram, indicating two sep-arate savings rates, 0.2 and 0.4: Suppose the savings rate is 0.2. At the steady state, what is capital per worker? What is output per worker? How much is saved per worker? Suppose the population growth rate is equal to the depreciationrate. Solve for n and d.arrow_forwardWith regards to Solow-Swan Model in economics, what does exogenous growth mean and what factors can lead to growth in output according to the model?arrow_forwardWe presented two versions of the Solow growth model. (1) In the simple version, there is no technological progress. Show in this simple version that at the steady state output per worker (GDP per worker) depends positively on the saving rate, and negatively on the population growth rate. What’s the growth rate of GDP at the steady state? What’s the growth rate of GDP per worker at the steady state? (2) In the version of the model with technological progress, what’s the growth rate of GDP at the steady state? What’s the growth rate of capital per worker at the steady state? What’s the growth rate of GDP per worker at the steady state? Show your stepsarrow_forward
- An economy described by the Solow growth model has the following production function: y=√k a.Solve for the steady-state value of y as a function of s, n, g, and darrow_forwardIf half of the capital decreased,what will be the new steady state level of capital per capita? Draw a picture.(Solow Model)arrow_forwardIn the Solow model with population growth and technological progress, the steady- state growth rate of total output is: On. 0. On+g. 0 g.arrow_forward
- Consider the following Solow growth model in which households save a constant fraction of their income. Let N be the population (also the labor force) in the current period. Assume that the population follows N′ = (1+n)N where N′ is the population in the future period, and n is the net population growth rate. Assume that the output is produced according to the production function Y = zF(K, N), where z is the total factor productivity, K is capital stock, and F(K, N) exhibits constant returns to scale. Capital depreciates at the rate d where 0 < d < 1. The capital stock changes over time according to K′ = (1 − d)K + I where I is the investment level. (a) Derive the equation that determines the future capital-per-worker in competitive equilibrium. Here is some additional information for parts (5b), (5c), and (5d). Suppose that the economy is initially in steady state, and experiences a natural disaster (e.g. the recent quake and tsunami in Japan in 2011) that destroys some of the…arrow_forwardIn the Solow growth model, suppose that the per-worker production function is given by y=zk2/3 . The saving rate is s, depreciation rate is d, and population growth rate is n. Calculate the per capita capital (k) and output per worker (y) in the steady state.arrow_forwardAssume that an economy is described by the Solow model in the long run. The rate of population growth in this economy isn=0.01 and the rate of technological growth is g= 0.02. What are the long-run (steady state) growth rates of total GDP, GDP per worker, and GDP per effective worker?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education