401ps6-10 - ECON 401 Autumn 2010 PROBLEM SET VI (for...

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ECON 401 Hartman Autumn 2010 PROBLEM SET VI (for Monday, November 22) 1. This problem deals with the basic Solow-Swan model of economic growth with no technical change. The savings rate, s , is fixed. Assume that the production function is 1/3 2/3 3 YK L where Y is output, K is the capital stock, and L is the input of labor. Capital accumulates according to K I K  where I is gross investment and is the depreciation rate. The population grows at the constant proportional rate n . Each person provides one unit of labor services, and therefore / LL n . a. Suppose that n 003 ., 012 . , and the savings rate is s 020 . . What is the steady state value of / kKL ? What is consumption per person in the steady state? b. If n . and . , what is the Golden Rule value of k ? What savings rate, s , gives rise to the Golden Rule? What is the corresponding steady state consumption per person? 2. Consider now a Solow-Swan model with labor augmenting technical change. Again, the savings rate, s , is fixed.
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This note was uploaded on 04/04/2011 for the course ECON 401 taught by Professor Staff during the Spring '08 term at University of Washington.

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