hw4 - Homework 4 (Due October 4) 1. (The Solow model with...

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Homework 4 (Due October 4) 1. (The Solow model with exogenous technological progress.) The tech- nology level at t is given by A t =(1+ g ) t A 0 ,where g 0 . To keep the case simple, let us assume n =0 . Now the transitional equation is simply k t +1 = s · A t · ( k t ) β +(1 δ ) k t . (1) That is, we simply replace the constant A intheprev ioustrans it iona lequa- tion with A t . Regarding the steady state, by de f nition (see PPT4), if the economy is in the steady state at t ,then y t +1 k t +1 = y t k t . (2) Substituting y t = A t k β t and y t +1 = A t +1 k β t +1 into Equation (2) and doing some algebra, we have k t +1 k t =(1+ g ) 1 1 β . (3) (If we apply g =0 to Equation (3), then we get k t +1 = k t , as in the previous study.) To see how to use the new transitional equation (Equation (1)) and the new steady-state relationship between k t +1 and k t (Equation (3)), let us do some exercises. Let A 0 =1 , g =0 . 01 , β =0 . 5 ,and δ =0
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This homework help was uploaded on 12/13/2007 for the course ECON 3140 taught by Professor Mbiekop during the Fall '07 term at Cornell.

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hw4 - Homework 4 (Due October 4) 1. (The Solow model with...

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