ECON HW3 solution

ECON HW3 solution - Homework 3 1 Solow Model(25 points) (a)...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon

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

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Homework 3 1 Solow Model(25 points) (a) By definition, output per capita y = Y N = K . 2 N . 8 N = k . 2 (b) Given k 1 = 9, y 1 = k . 2 1 = 9 . 2 = 1 . 5518 Using k = (1- d ) k + szf ( k ) 1 + n k 2 = (1- . 05)9 + 0 . 2 * 9 . 2 1 + 0 . 02 = 8 . 686 And y 2 = k . 2 2 = 1 . 541 (c) Using k * = (1- d ) k * + szf ( k * ) 1 + n or szf ( k * ) = ( n + d ) k * to get . 2 k * . 2 = 0 . 07 k * and k * = 3 . 715 . y * = k * . 2 = 1 . 300 c * = (1- s ) y * = 1 . 04 (d) Check Handout 5 or the textbook for the graph. (e) Growth rate of k , y , c are all 0, and growth rates of K , Y , C are all n . 2 Solow Model (Experiments)(25 points) (a) Similarly as in Problem 1, szf ( k * ) = ( n + d ) k * Using new depreciation rate to get k * = 2 . 378, y * = zf ( k * ) = 1 . 189, c * = 0 . 951. ( n + d ) k line will become steeper. (b) Similarly as in Problem 1, szf ( k * ) = ( n + d ) k * Using new TFP to get k * = 4 . 665, y * = zf ( k * ) = 1 . 633 1 , c * = 1 . 3064. szf ( k ) curve will shift up. 1 Some of you are wrong because you forgot to put z in front 1 (c) Similarly as in Problem 1, szf ( k * ) = ( n + d ) k * Using new depreciation rate to get k * = 1 . 562, y * = zf ( k * ) = 1 . 093, c * = 0 . 988. szf ( k ) curve will shift down. Golden rule capital stock satisfies zf ( k gr ) = n + d . Hence 0 . 2 k- . 8 gr = 0 . 07 and k gr = 3 . 715 2 To solve for s gr , use s gr f ( k gr ) = ( n + d ) k gr to get s gr = 0...
View Full Document

Page1 / 5

ECON HW3 solution - Homework 3 1 Solow Model(25 points) (a)...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online