In the Slow model, we have production given by Y = AKL-a where A is a...
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In the Slow model, we have production given by Y = AKL¹-a where A is a measure of productivity, Y is output, K is capital, L is labour and a is the capital share of income. (a) Assuming a = 1/3, L = 200 and A=2, draw a plot of output as a function of capita as capital varies between 0 and 4000 in steps of 40. [Hint: Use Excel, Python or R]. (b) Assume the savings rate is 25 percent and the depreciation rate is 10 percent, draw the savings as a function of capital and the amount of deprecation as a function of capital. This is a version of the Solow diagram seen in Figure 11.2 of Blanchard. Calculate the steady-date level of output worker. (c) Draw a third diagram to show the impact of savings rate increasing to 35 percent. Calculate the new steady state level of output per worker. (d) How does the savings rate affect the growth rate of output per worker? In the Slow model, we have production given by Y = AKL¹-a where A is a measure of productivity, Y is output, K is capital, L is labour and a is the capital share of income. (a) Assuming a = 1/3, L = 200 and A=2, draw a plot of output as a function of capita as capital varies between 0 and 4000 in steps of 40. [Hint: Use Excel, Python or R]. (b) Assume the savings rate is 25 percent and the depreciation rate is 10 percent, draw the savings as a function of capital and the amount of deprecation as a function of capital. This is a version of the Solow diagram seen in Figure 11.2 of Blanchard. Calculate the steady-date level of output worker. (c) Draw a third diagram to show the impact of savings rate increasing to 35 percent. Calculate the new steady state level of output per worker. (d) How does the savings rate affect the growth rate of output per worker?
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