homework3 2009 solutions

# homework3 2009 solutions - ECON 6000/7230 Fall 2009...

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ECON 6000/7230 Fall 2009 Homework 3 Solutions 1) With a Cobb-Douglas production function f ( k ) = k α , steady-state capital per effective worker is given by . * ) ( *) ( k g n k sf + + = δ * ) ( *) ( k g n k s + + = . * 1 1 - + + = g n s k In class, we showed the rate of convergence to k * is (1 - )( n + + g ). We also have . *) ( * g n s k f k Y K + + = = Thus - = 1 1 * Y K k . The rate of convergence is . ) 1 ( K Y s - The golden rule k * is defined by f ( k * gr ) = n + + g . With Cobb-Douglas production, g n k gr + + = - 1 ) * ( . * 1 1 1 1 - - = + + = Y K s g n k gr As in class, we assume n = 0.01 and g = 0.015. K/Y ALPHA S k* R of C k*gr

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ECON 6000/7230 Fall 2009 3 0.333333 0.25 5.196152 0.055556 8 2.5 0.333333 0.25 3.952847 0.066667 6.085806 3.5 0.333333 0.25 6.5479 0.047619 10.08115 3 0.3 0.25 4.803987 0.058333 6.233298 3
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## This note was uploaded on 01/09/2011 for the course ECON 7230 taught by Professor Feigenbaum during the Spring '10 term at Utah Valley University.

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homework3 2009 solutions - ECON 6000/7230 Fall 2009...

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