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**Unformatted text preview: **Econ 6344 – Macroeconomics I Final Examination December 4 th , 2007 Read each problem carefully and make sure you answer all the questions asked within each problem. 1. [25 points] Let’s consider some models of economic growth in which there is government spending, which is productive but is subject to congestion. Consider the following production function: y = k α (g/k) β All variables are in per capita terms. g denotes the amount of government capital per capita. It is accumulated by means of annual investments by the government, which are financed by a proportional tax on output at rate, T. Both government capital and private capital depreciate at a constant rate, δ , and there is no technological progress or population growth. The saving rate is constant and given by s, and savings takes place out of after-tax income. A. For the production function, what are the conditions on α and β under which we will have endogenous growth? B. Assuming we have endogenous growth, show for the model that in the steady- state g/k is constant....

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