Question: Calibrate the simple growth model as below: max {c} Blog() +log(1 - 1)] t=0 s.t. Ctxt = Yt 2t=ht+1 (18)k Yt = k11-a with

Calibrate the simple growth model as below: max {c} Blog() +log(1 -

Calibrate the simple growth model as below: max {c} Blog() +log(1 - 1)] t=0 s.t. Ctxt = Yt 2t=ht+1 (18)k Yt = k11-a with the following information of real economy: in the long run, on average, the investment-capital ratio is 0.1; the capital income share in GDP is 0.4; the average working hours per day is 8, that is a third of one day; the capital-output ratio is 4: and the consumption-output ratio is 0.7. - That is to find out the values of {3, 6,, a} that make the model consistent with the real economy. Note that you have to list all the details of induction. (15 points) Hint: The key is to match the model steady state moments with real economy ratios through appropriate equations.

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