1. Suppose that the economy's production function is that the saving rate, s, is equal to...

  

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1. Suppose that the economy's production function is that the saving rate, s, is equal to 10 percent, and the depreciation rate, &, is equal to 3 percent. Suppose further that the number of workers, L, grows at 1 percent a year and that the rate of technological progress, g, is 1 percent per year. Y = K.5(eL). 5, Find the steady-state values of the following: a. b. C. d. e. The capital stock per efficiency units of labor. Output per efficiency units of labor. The growth rate of output per efficiency units of labor. The growth rate of output per worker. The growth rate of output 2. Consider the Solow growth model. Suppose that the production function is constant returns to scale and it is explicitly given by: Y = AkaLl-a a. What is the level of output per capita, y, where y = Y/L? b. Individuals in this economy save s fraction of their income. If there is population growth, denoted by n, and capital depreciates at the rate of d over time, write down an equation for the evolution of capital per capita, k, k = K/L over time, denoted by 4k. C. On a Solow diagram show the steady state levels of k, y, c and i. d. Assume that the country is in its steady state. Explain what happens if due to a pandemic population growth rate declines (hint: identify which parameter is affected and how). Illustrate your answer on a Solow diagram. 1. Suppose that the economy's production function is that the saving rate, s, is equal to 10 percent, and the depreciation rate, &, is equal to 3 percent. Suppose further that the number of workers, L, grows at 1 percent a year and that the rate of technological progress, g, is 1 percent per year. Y = K.5(eL). 5, Find the steady-state values of the following: a. b. C. d. e. The capital stock per efficiency units of labor. Output per efficiency units of labor. The growth rate of output per efficiency units of labor. The growth rate of output per worker. The growth rate of output 2. Consider the Solow growth model. Suppose that the production function is constant returns to scale and it is explicitly given by: Y = AkaLl-a a. What is the level of output per capita, y, where y = Y/L? b. Individuals in this economy save s fraction of their income. If there is population growth, denoted by n, and capital depreciates at the rate of d over time, write down an equation for the evolution of capital per capita, k, k = K/L over time, denoted by 4k. C. On a Solow diagram show the steady state levels of k, y, c and i. d. Assume that the country is in its steady state. Explain what happens if due to a pandemic population growth rate declines (hint: identify which parameter is affected and how). Illustrate your answer on a Solow diagram.