Tutorial 2C - Economic Growth Revised

Tutorial 2C - Economic Growth Revised - Tutorial 2C...

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1 Tutorial 2C Economic Growth Short Answer Questions 1. In the Solow model, what determines the steady-state rate of growth of income per worker? 2. What data would you need to determine whether an economy has more or less capital than in the Golden Rule steady state? Applications 1. An economy described by the Solow growth model has the following production function: y = k (a) Solve for the steady-state value of y as a function of s , n , g and . (b) A developed country has a saving rate of 28 percent and a population growth rate of 1 percent per year. A less-developed country has a saving rate of 10 percent and a population growth rate of 4 percent per year. In both countries, technical progress evolves at a rate of 2 percent and the capital stock declines at a rate of 4 percent. Find the steady-state value of for each country. (c) What policies might the less-developed country pursue to raise its level of income? 2.
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This note was uploaded on 11/12/2011 for the course ECON 2003 taught by Professor Macoeconomics2 during the Spring '10 term at University of the West Indies at Mona.

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Tutorial 2C - Economic Growth Revised - Tutorial 2C...

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