ln4.5-revised

# ln4.5-revised - Econ 102 Winter 2012 Lecture Note 4.5 -...

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Econ 102 Winter 2012 Lecture Note 4.5 - Solutions to LN 4 Solutions 1. True or False (and explain): In a Solow model with g = 0, wages will always increase at the same rate as population growth. False. In the Solow model without technological growth (when g = 0 ), the wage will be: w t = (1 - α ) Ak α t which is not growing, even if n > 0 . 2. True or False (and explain): In the Solow model without growth, steady state consumption increases in the level of technology ( A ). True. The expression for steady state capital is k ss = ( sA δ ) 1 1 - α In steady state, c ss = (1 - s ) y ss = (1 - s ) Ak α ss = (1 - s ) A ( sA δ ) α 1 - α "Increases in the level of technology" means that A and C t are directly proportional (not inversely related) - it does not mean that C t has to be growing. 3. Just like the problem from the previous notes, write down the Solow model equations (either the three equation version or the two equation version) in aggregate (not per capita) and per capita terms for: (a) The Solow model with only population growth Y t = AK α t L 1 - α t I t = sY t K t +1 = K t + I t - δK t (b) The Solow model with population growth and technological growth 1

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Y t = K α t ( A t L t ) 1 - α I t = sY t K t +1 = K t + I t - δK t (c) (Harder) The Solow model with only TECHNOLOGICAL growth (in the notes I wrote only population growth) (for this model - also in question 7 and 8d - follow the derivation for the model with both technological and population growth but set n = 0) Y t
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## This note was uploaded on 02/06/2012 for the course ECON Econ102 taught by Professor D during the Spring '11 term at UCLA.

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ln4.5-revised - Econ 102 Winter 2012 Lecture Note 4.5 -...

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