Assume an economy has the following production function: Y = F(K,L) = 24K0.25 L0.75 Assume that...

 

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Assume an economy has the following production function: Y = F(K,L) = 24K0.25 L0.75 Assume that the savings rate is 0.08, the depreciation rate is 0.06 and the population growth rate in this economy is 0.045. Assume that the rate of technological progress is equal to 0. (a) Calculate the following steady-state variables. Round your answers to two decimal places. Calculate the per worker production function → f(k) = 24k0.25 (i) capital per worker (ii) output per worker (iii) investment per worker (iv) consumption per worker (b) Suppose the savings rate in this economy increases to 0.09. Graphically illustrate the effect that an increase in the savings rate will have on steady-state level of capital. (c) Suppose the savings rate in this economy increases to 0.09. Assume all other variables are the same as in Part (a). Calculate the following steady-state variables. (i) capital per worker (ii) output per worker (iii) consumption per worker. (iv) investment per worker 2. Basic Solow Model (Graphical Analysis) Assume that the United States is a Solow economy that is initially in steady state. For simplicity assume that there is no technological growth (g = 0). Suppose that President Trump is re-elected President in 2020 and exasperated individuals in blue states start to leave for Canada. As a result the number of workers (L) in the U.S. falls. Assume that the population growth rate (n) does not change (only L changes). Draw a graph showing what happens to capital per worker. In words describe what will happen to output per worker time. Assume an economy has the following production function: Y = F(K,L) = 24K0.25 L0.75 Assume that the savings rate is 0.08, the depreciation rate is 0.06 and the population growth rate in this economy is 0.045. Assume that the rate of technological progress is equal to 0. (a) Calculate the following steady-state variables. Round your answers to two decimal places. Calculate the per worker production function → f(k) = 24k0.25 (i) capital per worker (ii) output per worker (iii) investment per worker (iv) consumption per worker (b) Suppose the savings rate in this economy increases to 0.09. Graphically illustrate the effect that an increase in the savings rate will have on steady-state level of capital. (c) Suppose the savings rate in this economy increases to 0.09. Assume all other variables are the same as in Part (a). Calculate the following steady-state variables. (i) capital per worker (ii) output per worker (iii) consumption per worker. (iv) investment per worker 2. Basic Solow Model (Graphical Analysis) Assume that the United States is a Solow economy that is initially in steady state. For simplicity assume that there is no technological growth (g = 0). Suppose that President Trump is re-elected President in 2020 and exasperated individuals in blue states start to leave for Canada. As a result the number of workers (L) in the U.S. falls. Assume that the population growth rate (n) does not change (only L changes). Draw a graph showing what happens to capital per worker. In words describe what will happen to output per worker time.

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a Steadystate variables i Capital per worker k In the steady state capital per worker k is determine... View the full answer