Real GDP in a Solow Growth economy is determined by Y = K^1/2(AL)^1/2. The rate of depreciation is 2 percent per year. The population grows at a rate of 1 percent per year. Labour augmenting technological progress improves at rate of 2 percent per year. The savings rate is 0.20. a. Provide a labelled diagram to illustrate and quantify steady state capital per effective worker, GDP per effective worker and savings per effective worker as Bundle A. b. At equilibrium "A" GDP grows at a rate of __________ percent per year. c. The government introduces a tax-free saving account. The savings rate rises to 0.40. Update your diagram to illustrate and quantify steady state capital per effective worker, GDP per effective worker and savings per effective worker as Bundle B. d. At equilibrium "B" GDP grows at a rate of __________ percent per year.

A Solow Growth Economy with production function Y=K¹/²(AL)¹/² has a savings rate of 24 percent, a depreciation rate of 2 percent, labour force growth of 1 percent and technological progress improving at 3 percent per year. Provide a labelled diagram to illustrate and quantify the determination of equilibrium output per effective worker and capital per effective worker.

2. In the Solow growth model, suppose that the per-worker production function is given by y zk, with s = 0.25, d= 0.1, and n=0.02. (a) Suppose that in country A, z = 1. Calculate per capita income and capital per worker. (b) Suppose that in country B, z = 2. Calculate per capita income and capital per worker. (c) As measured by GDP per capita, how much richer is country B than country A? What does this tell us about the potential for differences in total factor productivity to explain differences in standards of living S across countries?

The Solow–Swan growth model with constant technology predicts: a. ongoing growth in per capita capital stock k b. an end to growth in per capita income y as countries reach their steady state c.ever-increasing growth in per capita income y d. ongoing growth in per capita income y

Evaluate the view that increased investment is the most important factor in achieving a faster rate of economic growth

This question is about the Solow model. For 2 countries, 1 and 2 which has the same rate of population growth and depreciation and the same saving rate, and are in initial steady state, their capital have equal importance for production for both countries with the same value of α = 1/2 a. In the initial steady state, country 1 has 2 times the output per capita to country 2 because of its greater productivity A. Please use the steady-state equation to find the ratio of the 2 countries’ ratio of productivity and explain it. b. Find the 2 countries’ ratio of capital per capita and explain it. c. Please explain in detail if the capital owners in country 1 are motivated to move their capital from country 1 which is capital abundant, to country 2 which is more capital scarce? Hint: the 2 countries’ payment per unit of capital d. Does workers in country 2 motivated to immigrate to country 1? Please explain from the perspective of the 2 countries’ wages.

Explain the importance of research about the standard of living and the endogenous growth model in a country. Why the standard of living is related to Solow Growth model?

Answer the following questions using the basic Solow growth model, without population growth or technological progress. (a) Draw a diagram with per worker output, y, consumption, c, saving, s and investment, i, on the vertical axis and capital per worker, k, on the horizontal condition. On this diagram, clearly indicate steady-state values for c, i, and y. Brie y outline the condition that holds in the steady- state (i.e. what is the relationship between investment and the depreciation of capital?). (b) Suppose that society becomes less thrifty, resulting in a lower rate of savings, s. Using the above diagram, how does the new steady-state capital stock per worker, k, compare to the stock in part (a)? How does output per worker compare? How does consumption per worker compare? [Note: Even if output per worker decreases, consumption per worker need not decrease. Why not?] (c) Suppose that the saving rate decreases at time t0. On a graph plot c, k, and i against t and show…

The Solow Growth Model assumes a closed economy. This implies   a.savings equals investment   b. a net capital outflow   c. income equals household consumption   d. tax revenue equals government expenditure

[The following scenario applies to the next two questions.] Countries ABC and XYZ follow the simple Solow growth model, with no changes in the technology level. The savings rate is 31% greater in country ABC than in country XYZ. The depreciation rate is 5.38% and the population growth rate is 2.28% in both countries. In 20XX, capital per worker is 884 and real GDP per worker is 248 in both countries. The growth rate of capital per worker in country XYZ is 1.69% per annum. Question 1.1: Savings rate What is the savings rate in country XYZ? A. 15.41% B. 15.93% C. 16.46% D. 16.98% E. 17.51% Question 1.2: Growth rate of capital per worker What is the growth rate of capital per worker in country ABC? A. 2.92% B. 3.01% C. 3.10% D. 3.18% E. 3.27%