This problem set is collected and graded. Due is Tuesday, Feb 26 in class.
ECN101
Problem Set 6
Instructor: Masako Miyanishi
1. We replicate Solow model numerically. You may want to work on excel sheet (if you have any question
about excel, let me know). You can work with a calculator as well.
Assume that an economy’s production function is Y=K
1/2
L
1/2
.
First we consider capital accumulation while fixing the amount of labor.
Suppose the amount of labor is fixed
as L =10.
Saving rate for this econo
my is s=0.3 and depreciation rate is δ=0.1.
a. First consider
nation’s total output
, Y.
Nation’s
capital stock K is given as follows.
For each level of K,
compute Y and Y/L (output per worker)
K
L
Y
Y/L
0
10
10
10
20
10
30
10
40
10
50
10
60
10
70
10
80
10
90
10
100
10
110
10
120
10
130
10
140
10
150
10
160
10
170
10
180
10
190
10
200
10
b. Now consider output per worker.
We can obtain “per

person” production function by dividing the above
production function by L. LHS is
.
RHS is (K
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
This is the end of the preview.
Sign up
to
access the rest of the document.
 Winter '08
 Miyanishi
 Steady State, Stock and flow, Capital accumulation, worker

Click to edit the document details