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first initial of last name:
ECO 320L
Fall 2010
Professor Beatrix Paal
Midterm 3
–
Problems
name:
11/22/2010
3 questions,
26 points total
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individual opportunity, and responsibility.
Each member of the University is expected to uphold these
values through integrity, honesty, trust, fairness, and respect towards peers and community."
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1
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View Full Document Points summary:
Question 1
Question 2
Question 3
Question 4
Question 5
Question 6
TOTAL
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2
1.
(_____ of 10 points)
An economy is described by the Solow growth model.
The aggregate
production function is
2
(,) 0
.
3
800
K
FKN
K
N
.
The population growth rate is
n
= 0.15 and the depreciation rate is
= 0.05.
Let the savings
rate be denoted by
s
.
a.
(_____ of 2 points)
Derive that the per worker production function can be written as
2
() 0
.
3
800
k
fk
k
,
where
k
is the capital labor ratio.
b.
(_____ of 3 points)
Let the savings rate be denoted by
s
.
Derive that the steady state capital labor
ratio, as a function of the saving rate, is
160
240
SS
k
s
.
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3
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View Full Document c.
(_____ of 3 points)
Prove that the Golden Rule capital labor ratio is
40
GR
k
.
d.
(_____ of 2 points)
What is the Golden Rule savings rate?
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2.
(_____ of 6 points + 3 points extra credit)
Assume that the aggregate production function is of the
following form:
1
()
tt
t
YA
K
N
h
where
t
h
stands for average human capital per worker, and the other symbols have the usual
meaning.
In the presence of human capital accumulation the growth accounting relationship
needs to be slightly modified.
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This note was uploaded on 06/09/2011 for the course ECON 320 taught by Professor Azzamonti during the Spring '08 term at University of Texas at Austin.
 Spring '08
 AZZAMONTI
 Macroeconomics

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