Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
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Question
Chapter 8, Problem 5PA
(a)
To determine
The steady state of Solow model.
(b)
To determine
The steady state of the economy.
(c)
To determine
The steady state of the economy.
(d)
To determine
The steady state of the economy.
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Draw a well- labeled graph that illustrates the steady state of the Solow model with population growth.
Use the graph to find what happens to steady-state capital per worker and income per worker in
response to each of the following exogenous changes.
A change in weather patterns increases the depreciation rate.
b. Better birth-control methods reduce the rate of population growth.
1. Draw a well-labeled graph that illustrates the steady-state of the Solow model with population growth. Use the graph to find what happens to steady-state capital per worker and income per worker in response to each of the following exogenous changes.a. A change in consumer preferences increases the saving rate.b. A change in weather patterns increases the depreciation rate.c. Better birth-control methods reduce the rate of population growth.
In the Solow–Swan model, a decrease in the rate of population growth will have what effect on the steady-state level of real GDP per capita?
a. Increase
b. No change in real GDP per capita because although it does change the rate at which output and population are growing, it will make both growth rates change by the same amount and so the output-population ratio will be unchanged
c. Decrease
d. No change in real GDP per capita because although it does change the level of labour, the level of capital will change to keep the capital-labour ratio the same as before
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Similar questions
- Consider the Solow growth model seen in lectures. Use n to denote population growth. Which of the following is true in steady state? a. ΔK/K= ΔY/Y= 0 ; Δk/k= Δy/y= 0 b. ΔK/K= ΔY/Y= 0 ; Δk/k= Δy/y= n c. ΔK/K= ΔY/Y= n ; Δk/k= Δy/y= 0 d. ΔK/K= ΔY/Y= n ; Δk/k= Δy/y= n e. None of the abovearrow_forwardAn economy described by the Solow growth model has the following production function: y = Vk A. Solve for the steady-state value of y as a function of s, n, g, and d. B. A developed country has a saving rate of 28 percent and a population growth rate of 1 percent per year. A less developed country has a saving rate of 10 percent and a population growth rate of 4 percent per year. In both countries, g = 0.02 and d= 0.04. Find the steady- state value of y for each country. C. What policies might the less developed country pursue to raise its level of income?arrow_forwardThis question refers to the Solow–Swan model with constant technology. Imagine the model is in steady state and the population growth rate rises. As a result the steady-state level of real GDP per capita will: a. fall b. rise c. stay the same d. can’t say because we need to know what will happen to the steady-state level of capital per person and, in the absence of that information, we can’t answer the questionarrow_forward
- 2b. “The Solow model shows that the higher the rate of population growth, the higher the steady-state levels of capital per worker and output per worker because more population means more worker so more output”. Do you agree with the statement? Graphically explainarrow_forwardProduction function is given by Y= (1/2)K^a(AN)^(1-a), where a=2/3. The rate of depreciation of capital is equal to 15 percent, the rate of technological progress is equal to 3 percent, and the rate of population growth is equal to 2 percent. The economy was in the steady state at time tand the level of technology was equal to A=80. Use the Solow growth model to answer the following questions. 1. If the saving rate s=80 percent, the steady state level of output per unit of effective labor at time tis equal to ... 2. If the saving rate s=80 percent, the steady state level of consumption per unit of effective labor at time tis equal to ... 3. If the saving rate s=80 percent, the steady state level of consumption per worker at time tis equal to ..arrow_forwardThis 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.arrow_forward
- Draw a well labeled graph that illustrates the steady state of the solow model with population growth. Use the graph to find what happens to steady state capital per worker and income per worker in response to each of the following exogenous changes D. A one time permanent improvement in technology increases the amount of output that can be produced from any given amount of capital and labor. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardWhat are Critisms or the drawbacks of the Solow Growth Model? What types of economical growth that it does not account for?arrow_forwardWhat can the Solow model tell us about growth in the short term and in the long term? What is different between the Solow model and the endogenous growth model?arrow_forward
- What are the characteristics of a steady state in the Solow growth model?arrow_forwardConsider the Solow growth model. In a diagram, illustrate the effect of an increase in the rate of technological progress on the steady-state level of output per effective worker. What happens to the long-run growth rate of output per worker? Explain and give economic intuition for your answer.arrow_forwardHow does the Solow growth model explain economic growth?arrow_forward
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