3. Consider an economy in which the equilibrium solves the optimal growth problem 00 max B'...

 

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3. Consider an economy in which the equilibrium solves the optimal growth problem 00 max B' (0 log(C)+(10) log(NhL,)) s.t.: t=0 C + K = (1 8)K, + AK (y'L)-a t C > 0 t+1 K>0 t+1 Ko is given 0 N = n'No t a) Define a balanced growth path for this economy. Write down conditions that characterize this balanced growth path. Verify that the balanced growth path exhibits characteristics consistent with Kaldor's stylized facts on economic growth. 3. Consider an economy in which the equilibrium solves the optimal growth problem 00 max B' (0 log(C)+(10) log(NhL,)) s.t.: t=0 C + K = (1 8)K, + AK (y'L)-a t C > 0 t+1 K>0 t+1 Ko is given 0 N = n'No t a) Define a balanced growth path for this economy. Write down conditions that characterize this balanced growth path. Verify that the balanced growth path exhibits characteristics consistent with Kaldor's stylized facts on economic growth.

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The balanced growth path in this economy is characterized by constant growth rates of consumption c... View the full answer