This question is about the Solow growth model from Chapter 5. Consider a countries Am brosia...

  

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This question is about the Solow growth model from Chapter 5. Consider a countries Am brosia and Burunda. Ambrosia's GDP per worker is 1.96 times that of Burunda. The ratio of investment to output is 0.35 in Ambrosia, and in Burunda it is 0.25. Labour supply is constant over time in both countries. So is total factor productivity (TFP), Assume both countries are in their respective steady states. Suppose output in each country i= A, B is produced according to Ya = A, KL where Ya is output for country i at time t, A, is TFP for country i, K is capital stock in country i at time t, and L, is labor in country i. Capital is accumulated according to AKast = ,Ya- dK (1) Assume that the depreciation rate and the capital share are same acrOss two countries. (a) Derive an expression for the steady state value of output per worker (Y/L) in each country i in terms of A4, SA, d and a for country A, and in terms of Ag, Sg, d and a for country B. (10 points) 1/3. What must be the ratio of TFP in country A to TFP in country (b) Suppose a %= B (i.e. AA/An) in order to fit the facts noted at the beginning of the question. (5 marks) [Assume that the depreciation rate and the capital share are same across two countries.) This question is about the Solow growth model from Chapter 5. Consider a countries Am brosia and Burunda. Ambrosia's GDP per worker is 1.96 times that of Burunda. The ratio of investment to output is 0.35 in Ambrosia, and in Burunda it is 0.25. Labour supply is constant over time in both countries. So is total factor productivity (TFP), Assume both countries are in their respective steady states. Suppose output in each country i= A, B is produced according to Ya = A, KL where Ya is output for country i at time t, A, is TFP for country i, K is capital stock in country i at time t, and L, is labor in country i. Capital is accumulated according to AKast = ,Ya- dK (1) Assume that the depreciation rate and the capital share are same acrOss two countries. (a) Derive an expression for the steady state value of output per worker (Y/L) in each country i in terms of A4, SA, d and a for country A, and in terms of Ag, Sg, d and a for country B. (10 points) 1/3. What must be the ratio of TFP in country A to TFP in country (b) Suppose a %= B (i.e. AA/An) in order to fit the facts noted at the beginning of the question. (5 marks) [Assume that the depreciation rate and the capital share are same across two countries.)

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