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Econ 101
Javier Birchenall
Due date:
Tuesday, November 10, 2009
Problem set 4: The Solow model
The following problem set will acquaint you with some basic dynamic aspects used in macroeconomics. Plan
to spend 6 hours (maybe more) on these questions. Please return the problem set on time (next Thursday
during class), remember you have the chance to miss one and only one, use it wisely. If you have any
problems regarding the questions please contact me or your TA immediately. Good luck!
Please remember to show your work and write your section.
I. The Solow model
The Solow model is an important formal model of economic growth. Assume that the production function
is
Y
=
zF
(
K, N
)=
zK
α
N
1
−
α
. The previous production function has constant returns to scale so we can
write in per capita terms.
(a) Show that income per worker
y
=
Y/N
is given by:
y
=
zk
α
,
with
k
=
K/N
.
The evolution of capital is given by:
K
0
=
I
+(1
−
d
)
K
.
Assume
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This note was uploaded on 12/25/2009 for the course ECON 101 taught by Professor Dumbass during the Fall '08 term at UCSB.
 Fall '08
 DUMBASS
 Macroeconomics

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