Again, start with the equation of motion for the Solow Growth model kt+1(1+n) = kt+skt -...

 

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Again, start with the equation of motion for the Solow Growth model kt+1(1+n) = kt+skt - dkt and parameter values 6 = 0.06, n = -0.01 (population is shrinking) and a = 0.5. Set the savings rate s = 0.1 1. Solve for the golden rule steady state? 2. How much consumption would be gained by consuming at the golden rule steady state compared to the steady state consumption with s = 0.1. 3. Suppose that you begin at the steady state capital per capita associated with s = 0.1 in period 0. Again, number a spread sheet with periods from 0 to 100. In period 1, set the savings rate to the golden rule steady state and then compute k through period 100. How close do you get to the new steady state? 4. In the first period after s changes to the golden rule, sgr is consumption higher or lower? In period 100? Again, start with the equation of motion for the Solow Growth model kt+1(1+n) = kt+skt - dkt and parameter values 6 = 0.06, n = -0.01 (population is shrinking) and a = 0.5. Set the savings rate s = 0.1 1. Solve for the golden rule steady state? 2. How much consumption would be gained by consuming at the golden rule steady state compared to the steady state consumption with s = 0.1. 3. Suppose that you begin at the steady state capital per capita associated with s = 0.1 in period 0. Again, number a spread sheet with periods from 0 to 100. In period 1, set the savings rate to the golden rule steady state and then compute k through period 100. How close do you get to the new steady state? 4. In the first period after s changes to the golden rule, sgr is consumption higher or lower? In period 100?

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