Y = f(k) = ka, where a = 0.25 S = 0.3 δ = 0.2 n...

Y = f(k) = k^a, where a = 0.25

S = 0.3

δ = 0.2

n = 0.05

g= 0.02

a. Find the steady state capital per effective worker, output per effective worker, investment per effective worker, and consumption per effective worker.

b. Find the steady state growth rate of capital per worker, output per worker, investment per worker, and consumption per worker.

c. Find the steady state growth rate of capital, output, investment, and consumption.

d. Show using two separate graphs the effects on the Solow growth model (i) an increase in the savings rate, and (ii) and an increase in depreciation rate, the population growth rate, or the technological growth rate.

Expert Solution

Increase in saving rate shifts the investment curve (sy) upward . as a result ,there is an increase in the steady state level of capital and output per effective worker.

And Increase in any of the on elike population growth rate (n) , deprreciation rate or technological progress (g) . This will move the breakeven investment tilt upward. As a result, steady state output and capital per effective worker decreases.

Rahul Sunny answered 2 years ago

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