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Unformatted text preview: University of Toronto Mississauga
Department of Economics ECO 325H5F: Advanced Economic Theory —— Macro
Prof. Kambourov
Term Test Tuesday, October 20, 2009 Instructions: The exam is 110 minutes long. Show all your work. In particular, make sure that it is clear where your answer is coming from. You are allowed to use calculators.
Good luck! Suppose that the capital share is 0.6, the rate of population growth is 1%, the rate
of technological growth is 2%, and the rate of capital depreciation is 2%. Find out
how many years it will take for y to cover half the distance from some initial level y(0) to y’“. 2. (30 points) Consider the Solow Growth Model and an economy that is on its bal
anced growth path. Suppose that there is a permanent decrease in the population 3. (45 points) Consider the RamseyCassKoopmans Model. Describe how each of
the following affects the c' = 0 and k = 0 curves in the model’s phase diagram.
Describe how these changes affect the balanced—growth—path values of c and k, and the whole dynamics of moving from the initial balancedgrowth—path values to the
new balancedgrowthpath values. (a) A decline in 0.
(b) An upward shift of the production function. (c) A change in the rate of depreciation from the value of zero assumed in the text
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 Fall '09
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