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Unformatted text preview: 1 The Hong Kong University of Science and Technology ECON 112 (L1, L2) Macroeconomics Final (Fall 2010) * *Solution and marking scheme** Instructor: Prof. Li, Yao Amber TA: Fok Pik Lin, Astor December 14, 2010 Part II SHORT ANSWER QUESTIONS (55/100 marks) INSTRUCTION: 1. PLEASE PUT YOUR NAME, STUDENT NUMBER AND SECTION NUMBER IN THE SPACE BELOW. 2. PLEASE ENTER YOUR ANSWERS IN THE INDICATED BLANKS . 3. YOU NEED TO WRITE DOWN NECESSARY STEPS TO DERIVE RESULTS. 4. THERE ARE 12 PAGES IN PART II. STUDENT NAME STUDENT NUMBER SECTION NUMBER 2 General reminder: when you draw diagrams, remember to label the axes. Question 1: Long Run Growth Model (17 marks) Consider an artificial economy, the Republic of Solowakia, which has the following production function: Y t = A t K t α N t (1-α) where α<1. Assume for now that A t is constant over time (there is no technological progress in this economy, so A t =A), n is the growth rate of N and n>0 , δ is the rate of depreciation in this economy, and s is the saving rate....
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