Country A is a Solow economy with the following production function F(K, L) AK" L', with A and L exogenously given. Assume the capital share in output is equal to 1/3, the saving rate is 20% and the %3D depreciation rate is 10%. What happens to the steady state level of consumption if depreciation rate drops to 5%? O It decreases O It increases It stays constant The effect of the change in depreciation rate on steady-state consumption is ambiguous. Consider the Solow model. Suppose the economy is initially at steady state, and there is a sudden increase in the depreciation rate of the economy. Then, at the new steady-state, the output to capital ratio will: O be higher O be lower O remain the same O be higher or lower, we don't have enough information to answer the question.

Country A is a Solow economy with the following production function F(K, L) AK" L', with A and L exogenously given. Assume the capital share in output is equal to 1/3, the saving rate is 20% and the %3D depreciation rate is 10%. What happens to the steady state level of consumption if depreciation rate drops to 5%? O It decreases O It increases It stays constant The effect of the change in depreciation rate on steady-state consumption is ambiguous. Consider the Solow model. Suppose the economy is initially at steady state, and there is a sudden increase in the depreciation rate of the economy. Then, at the new steady-state, the output to capital ratio will: O be higher O be lower O remain the same O be higher or lower, we don't have enough information to answer the question.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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