Consider the Solow model with Y = AKL- as defined in the slides. If TFP increases...

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Consider the Solow model with Y = AKL¹- as defined in the slides. If TFP increases by 6% whilst both K and L decrease by 4.5%, how much does Y change by? If the share of Labour in output has increased in equilibrium, what do you know must have happened to a? Consider an equilibrium path (=steady state path) in which TFP growth per year is 1% whilst population growth is 2% per year. Is it then true (or not) that capital per labour decreases over time? Is it true or not that capital-per-labour grows more quickly if the share of capital in output is higher? Consider the Solow model with Y = AKL¹- as defined in the slides. If TFP increases by 6% whilst both K and L decrease by 4.5%, how much does Y change by? If the share of Labour in output has increased in equilibrium, what do you know must have happened to a? Consider an equilibrium path (=steady state path) in which TFP growth per year is 1% whilst population growth is 2% per year. Is it then true (or not) that capital per labour decreases over time? Is it true or not that capital-per-labour grows more quickly if the share of capital in output is higher?

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Lets address each question one by one 1 How much does Y change by if TFP increases by 6 whilst both ... View the full answer