51000 300 015 525 Investment is I 250 500r 250 500 015 175 4AD Y 300 30 M P AS

51000 300 015 525 investment is i 250 500r 250 500

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= 525. = 400. P ) = 0. P Y (30 × + 10( P = 600. P
205 Abel/Bernanke • Macroeconomics, Fifth Edition 5.(a)To find the Solow residual, use the equation for the production function, dividing through to solve for A: A=Y/K0.3N0.7. Assuming there’s no change in utilization rates, this is the measured Solow residual. Given that equation, plugging in the values for Y, K, and N, gives the Solow residual as 1.435 in 2000 and 1.507 in 2001. The growth rate of the Solow residual is as (d) Setting uN=1 in year 2000 and 1.03 in year 2001, and uK=1 in year 2000 and 1.03 in year 2001, we calculate the value of Aas 1.435 in 2000 (as in part a), and 1.463 in 2001. This is an

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