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# Quiz - and that 5 of capital depreciates each year Assume...

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1 ECON 202 Macroeconomic Theory Middle East Technical University, Fall 2011-2012 QUIZ Tuesday, January 3, 2012 (20 minutes) Please answer the following questions. Write your answers clearly on the quiz. Please do not write any unnecessary information and write your answers very shortly. You can achieve a total of 10 points. There are 6 questions. GOOD LUCK! NAME………………………………………………………. STUDENT NUMBER………………………………………..

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2 1) Country A and country B both have the production function: A) Does this function have constant returns to scale? Explain(2 pts) B) What is the per-worker production function [ ?(2pts)
3 C) Assume that neither country experiences population growth or technological progress

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Unformatted text preview: and that 5% of capital depreciates each year. Assume further that country A saves 10% of output each year and country B saves 20% of output each year. Using your answer from part B) and the steady-state condition that investment equals depreciation, find the steady-state condition that investment equals depreciation; find the steady-state level of capital per worker for each country. Then find the steady-state levels of income per worker and consumption per worker.(3 pts) D) What is the golden rule of capital accumulation? Show how it is calculated and explain what it is. What is the saving rate at the golden rate of capital accumulation? (3pts, 1 points each) 4 Scratch paper...
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Quiz - and that 5 of capital depreciates each year Assume...

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