# Quiz3AAnswerkey - ECO 420-002 and 004 Fall 2008 Quiz 3A On...

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ECO 420-002 and 004, Fall 2008 Quiz 3A On my honor, I have neither given nor received unauthorized aid on this quiz: ______________ Name:___________________________________________ Section: _______________ 1. Consider the per effective worker production function y=k 1/2 If the population is growing at 1%, the depreciation rate is 0.05, saving rate is 0.40 and the growth rate of technology is 0.02, a. Calculate capital per effective worker in steady state. (4 points) sf(k) = (δ+n+g)k sk 1/2 = (δ+n+g) k* =(s/( δ+n+g)) 2 = (0.40/(0.05+0.01+0.02)) 2 = 25 b. Calculate output per effective worker in steady state. (2 points) y=25 1/2 = 5 c. Find the golden level of capital and output per effective worker.(4 points) MPK = (δ+n+g) 1/2k -1/2 = 0.08 k -1/2 = 0.16 k = 1/0.16 = 6.25 k* gold = 6.25 2 = 39.0625 d. What type of policy should this country pursue to attain the Golden State?(2 points) This country has a steady state equilibrium that is below the Golden State. This country should pursue policies to promote saving. Public saving can be increased

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## This document was uploaded on 10/28/2011 for the course ECON 420 at UNC.

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Quiz3AAnswerkey - ECO 420-002 and 004 Fall 2008 Quiz 3A On...

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