Answer to selected problems
Cristina Echevarria
Abstract
Chapter 2 of Joness Introduction to Economic growth
1. A decrease in the investment rate
2. An increase in the labour force. The shock is similar to that of a war
that destroys capital. The immediat
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Homework 4
1. Consider the Solow model with population growth but no technical progress.
Assume that population can grow at two dierent rates n1 and n2 , where
n1 > n2 . The population growth rate depends on the level of output per
capita (and therefore
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Chapter 7
1. Cost-benet analysis. (a) Firstly we calculate the present value of the stream of prots assuming that the project yields prots forever. Applying the formula for the innite series of a decreasing geometrical progression a1 S= 1 where a denote
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Chapter 5
1. If we understand the change in to happen just once but to be permanent, this means an increase in the slope of the line representing A/A (gure 1a in the back). The rst eect is a jump from point A to point B. In the next period, the proporti
1. Transition dynamics in the land model. Define z= Taking natural logs, -1 K = BK -1 T L1- Y
ln z = - (ln B + ( - 1) ln K + ln T + (1 - - ) ln L) . Taking the derivative with respect to time, since T is a constant, ! K z = - gB + ( - 1) + (1 - - )n z K (
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Homework 2
1. Consider the Solow model without technical progress. In class we derived the steady-state values for capital per worker (k ) and output per worker (y ) as a function of saving rate (s), population rate (n), and depreciation rate (d). (a) S
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Homework 3
1. We have seen in class Kaldors stylized facts of growth in developed countries. The Cobb-Douglas production function is used to replicate fact a.
In this exercise, you are asked to show that the steady state in the Solow
model with technolo