EC202 PS5solution

EC202 PS5solution - Fall 2015 EC202 Section D Problem Set 5...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Fall 2015 - EC202 Section D - Problem Set 5 Textbook Questions Chapter 12 Question 4 For each of the economic changes listed in (a) and (b), assess the likely impact on the growth rate and the level of output over the next five years (the initial impact) and over the next five decades (the long-run adjustment to the balanced-growth path). a. A permanent reduction in the rate of technological progress. Solution: The growth rate of output per worker falls in the short run and continues to fall over time. In the long run, the growth rate approaches a new steady state with a permanently lower (but still positive) growth rate. Total output per worker continues to rise over time, just at a slower rate. b. A permanent reduction in the savings rate. Solution: A permanent reduction in the saving rate has no affect on the steady-state growth rate of output per worker. The growth rate of output per worker falls (but remains positive) in the short run but in the long run it approaches its original steady-state rate. Chapter 12 Question 6 Suppose that the economy’s production function is Y = K AN that the savings rate s is equal to 16% and that the rate of depreciation δ is equal to 10%. Suppose
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern