Question

In the augmented Solow model, which of the following shocks generate jump (contemporaneous change) in the evolution of any per-efficiency unit variable k,y,c,i:

		a lower saving rate (s).
		a decrease in population growth (n).
		a decrease in productivity (A).
		an increase in depreciation rate (δ).

Answer 1

According to allow growth model there are few factor that can create shocks and shifts in the output per-worker line that is output line.

As asked what are the given factors can cause the jump in the solow growth model.

The change in the variables like K,Y,C,i

The given factors are as follows

a lower saving rate (s)

a decres in population growth (n)

a decrease in productivity (A)

An increase in the depreciation rate ()

After consridering these factors secondseco can only cause the positive shock that means fall in population growth. It will create jump in the growth model and increase the output and by increase the output per worker line.

Remaing all the factors will bring the negative shocks and results fall in the output per worker.

Now we wil see it in graph how Decrease in the population growth (n) brings jump in the growth model and positive changes in the output.

The graph as follows

This negative change in n brings positive change in the real variables k,y,i,c finally which increases the capital that leads to increase in the output perworkper..

But except this all the remaining shocks brings negative change in the investment and negative change in the (k) . That ultimately brings negative chnage in the output per worker (Y) . So these can't bring jump in the solow growth model where as the fall in the (n) population growth rate this positive shock can bring jump in the output per-worker.