Econ2102S2_Tutorial_2s[1]

# Y0 capital accumulation the path of output or output

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Unformatted text preview: l look capital accumulation. The path There is a direct effect via the production function and then a second effect that comes from higher like the following. Y*(0) capital accumulation. The path of output (or output per-capita) over time will look like the following. Y(1) T (c)If A growths at his vertical section shows the direct effect on output. stock also grows at a constant rate. a constant rate then the capital Y*(0) (d)An increase in A looks like it is a free lunch – there is no cost to it. In the case of an increase in the investment rate, it has to come at the cost of a lower (initial) level of (c)If A growths at a constant rate then the capital stock also grows at a constant rate. consumption. (c) A looks like it is a free lunch – there is no cost to u In the case of an (d)An increase inIn the Solow model, when A it. ndergoes a one-time increase, capital accumulation increase in the investment rate, it has to come at the cost of a lower (initial) level of consumption. Q5. occurs on the transition path. But if A growths at a constant rate then capital accumulation will continually occur. " hus output will grow continually because of T" Q5. (a) Use the production function ! and the rules for growth rates (Jones Ch. ihe production functionA ! nd b"ecause of capital accumulation that results from the increases in ncreases in a " and the rules for growth rates (Jones Ch. (a) Use t 3, page the growth rate of output as agrowth the growth rate of 53) to write the function of rate of output as a function of the growth rate of 3, page 53) to write A capital. . We can go further and argue that because K/Y would be equal to s/d in steady capital. (b) Combine the above equation with the following one state, capital and output cannot continuously grow at different rates or else the ratio (b) Combine the above # equation with the following one would converge ! zero or\$ infinity. Thus, they must grow at the same rate. to " to obtain a solution for the growth rate of per-capita GDP as a function o...
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## This document was uploaded on 03/15/2014.

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