set10154a

# set10154a - Econ 154b Yale University Spring 2005 Prof....

This preview shows pages 1–2. Sign up to view the full content.

Econ 154b Yale University Spring 2005 Prof. Tony Smith HOMEWORK #10 You do not need to turn in this homework assignment but you are responsible for the material it covers. The main purpose of this assignment is to help you study for the ﬁnal exam. 1. This problem studies a version of the Solow growth model developed in Chapter 6 of the textbook. Suppose that aggregate output in period t is given by: Y t = K 0 . 3 t N 0 . 7 . Labor supply N is assumed to be constant over time, so without loss of generality set N = 1 throughout the rest of this problem (this is just a normalization of the total labor input and does not aﬀect any of the results). Let the depreciation rate d = 0 . 1 and let the savings rate s = 0 . 2. Aggregate capital evolves according to the following law of motion: K t +1 = (1 - d ) K t + sY t . (a) Calculate the steady-state capital stock implied by the law of motion for aggregate capital. Calculate the level of steady-state consumption implied by the steady- state capital stock. (Note: The Solow growth model as developed in Chapter 6 of the textbook assumes that the labor force is growing at rate n and focusses on the dynamic behavior of capital per worker. In this problem, we are assuming that the labor force does not grow: i.e., n = 0. Because N is constant and has been normalized to be equal to 1, total capital, K t , and total capital per worker,

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## This homework help was uploaded on 04/06/2008 for the course ECON 154 taught by Professor Bjoernbruegemann during the Spring '07 term at Yale.

### Page1 / 3

set10154a - Econ 154b Yale University Spring 2005 Prof....

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online