Econ2102S2_Tutorial_2s[1]

# In the case of use the fact that to obtain a solution

This preview shows page 1. Sign up to view the full content.

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

Unformatted text preview: f the current ! \$ level of capital. Write your answer in terms of the and the parameters of the # model " only.(d) An increase. in A looks like it is a free lunch – there is no cost to it. In the case of (Use the fact that !) to obtain a solution for the growth rate of per-capita GDP as a function of the current a relevant rules are that if ! then ! # and ! has to come at the cost of a lower (initial) level (a)Then increase in the investment rate, it # then and the parameters of the model ! level of capital. Write your answer in terms of the of % consumption. ! " " only. (Use the fact that !) Since A and L are constant, they have zero growth rates. So.we get !"# Question 5.8 (b)Since L is constant the growth rate of per-capital output is just equal to the (a)The output. So we can use the result from if ! then !# and ! # then growth rate of totalrelevant rules are that (a) ! % " " ! Since A and L are constant, they have zero growth rates. So we get !"# " " (b)Since L is constant the growth rate of per-capital output is just equal to the growth rate of total output. So we can use the result from (a) 6 !"# Note that " ! # " so " ! # " or " ! # " Now use the solution for K* from lectures " ! If we substitute this into the above equation we get " ! # " or !\$ % Finally ! " # &\$ % ' Note that when K(t) is very low (a country is very poor) the Solow-Swan model implies that it should have a relatively high growth rate. 7...
View Full Document

## This document was uploaded on 03/15/2014.

Ask a homework question - tutors are online