(a) Consider the third stage of the Solow model of economic growth, with population growth and technological...
Question:
(a) Consider the third stage of the Solow model of economic growth, with population growth and technological progress.
(i) What is meant by a steady-state equilibrium? Use the capital accumulation equation in your answer.
(ii) Illustrate an economy at a steady-state equilibrium. [There should be three curves in your diagram]
(b) Suppose that the capital stock is €500 billion, then labour force is 2m workers, the depreciation rate is 5% and then labour force is growing at 2% each year. Calculate the required breakeven level of investment per worker. Show all calculations.(c) (i) Suppose that country A initially has a lower income-per-head than country B, and that both countries are growing their incomes at the same rate. Illustrate this situation, on an simple time-series diagram.
(ii) Then for several years country A devotes more efforts ton improving technological progress. Using a new diagram, explain and illustrate the effect of this change.
Auditing a business risk appraoch
ISBN: 978-0324375589
6th Edition
Authors: larry e. rittenberg, bradley j. schwieger, karla m. johnston