Suppose that the depreciation rate increases. In the Solow growth model, determine the effects of this on the quantity of capital per worker and on output per worker in the steady state. Explain the economic intuition behind your results.
Answer to relevant QuestionsIf total factor productivity decreases, determine using diagrams how this affects the golden rule quantity of capital per worker and the golden rule savings rate. Explain your results.Suppose, in the Solow growth model, that learning by doing is captured as a cost of installing new capital. In particular, suppose that for each unit of investment, r units of goods are used up as a cost to firms.(a) ...A consumer’s income in the current period is y = 100, and income in the future period is y' = 120. He or she pays lump-sum taxes t = 20 in the current period and toe = 10 in the future period. The real interest rate is ...Assume an economy with 1,000 consumers. Each consumer has income in the current period of 50 units and future income of 60 units and pays a lump-sum tax of 10 units in the current period and 20 units in the future period. ...Use the social security model developed in this chapter to answer this question. Suppose that the government establishes a social security program in period T, which provides a social security benefit of b (in terms of ...
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