ECON202assignment6

# ECON202assignment6 - ECON 202 SPRING 2009 Assignment 6...

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ECON 202, SPRING 2009 Malhar Nabar Assignment # 6 Posted: May 5 Due: In my mailbox 11 am, May 12 Note: covering material from the start of the semester to the most recent topics covered in class. 1. Solow Model: Theory An economy is described by the following aggregate production function Y = K 0 : 5 ( el ) 0 : 5 The depreciation rate on capital is 0.03. The growth rate of the labor force n is 0.01. The growth rate of technology g is 0.01. The saving rate is 10 per cent of GDP. a. Please write down the "intensive form" of the production (i.e. the production function in per e/ective worker terms). b. Provide the equation that describes the accumulation of capital per e/ective worker in this economy. c. Calculate the steady state levels of capital per e/ective worker and output per e/ective worker. d. Calculate the steady state aggregate capital to aggregate output ( K=Y ) ratio. e. Suppose that the saving rate is raised to 15% of GDP. Calculate the new ( K=Y ) ratio. 2. Policy analysis using the Solow Model You are the newly appointed Chief Economic Adviser to the President. The President is con-

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## This note was uploaded on 06/15/2010 for the course ECON 202 taught by Professor Nabar during the Spring '08 term at Wellesley College.

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ECON202assignment6 - ECON 202 SPRING 2009 Assignment 6...

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