This question aims to explore some of the points discussed about the Solow-Swan model. Consider an...
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This question aims to explore some of the points discussed about the Solow-Swan model. Consider an economy with the general Cobb-Douglas production function: Y = A*KaL(1-a) The equation describing capital dynamics is: Kt+1= K++lt-dkt Where d is a constant parameter that captures the depreciation rate. Investment follows a behavioural equation asdiscussed in class, ie, a constant 's' fraction of output is invested in every period.Answer the following questions assuming that labour grows at the rate n = 0 and adopting the assumptions made in lecture. 73. Assume: s= 0.60, d= 0.10, a = 0.5, L= 1and A= 1 The level of the interest rate in steady state is 8.33% The level of the interest rate in steady state is 20.41% More information is required to compute the interest rate in equilibrium • The level of the interest rate in steady state is 40.82% The level of the interest rate in steady state is 18% This question aims to explore some of the points discussed about the Solow-Swan model. Consider an economy with the general Cobb-Douglas production function: Y = A*KaL(1-a) The equation describing capital dynamics is: Kt+1= K++lt-dkt Where d is a constant parameter that captures the depreciation rate. Investment follows a behavioural equation asdiscussed in class, ie, a constant 's' fraction of output is invested in every period.Answer the following questions assuming that labour grows at the rate n = 0 and adopting the assumptions made in lecture. 73. Assume: s= 0.60, d= 0.10, a = 0.5, L= 1and A= 1 The level of the interest rate in steady state is 8.33% The level of the interest rate in steady state is 20.41% More information is required to compute the interest rate in equilibrium • The level of the interest rate in steady state is 40.82% The level of the interest rate in steady state is 18%
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Macroeconomics
ISBN: 978-1464168505
5th Canadian Edition
Authors: N. Gregory Mankiw, William M. Scarth
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