Chapter 3
Solutions to Exercises
1. marts 2010
Exercise 3.1: The elasticity of substitution between capital and labour and
the income distribution
1. The marginal rate of substitution between capital and labour is given by the ratio
of the marginal produc
ECON 413
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Chapter 5
Solutions to Exercises
1. marts 2010
Exercise 5.1. The general Solow model in continuous time
1. Taking logs on both sides of k = K/(AL) and dierentiating wrt. time gives:
K L A
k
.
=
K L A
k
Inserting sY K for K, and n for L/L, and g for A/A g
84
Chapter 3 Capital accumulation and growth
6. Economics has much more to say about the sources of prosperity and growth than what
can be inferred from the basic Solow model. For instance, human capital (the education
and training embodied in people),
ECON 413
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Employment and the Wealth of Nations
Economic Growth and Fluctuations
May 2013
Samuel Danthine
Wealth of Nations and Employment
A nations wealth depends on production
Production depends on employment
So the wealth of nations depends on employment
Emplo
The Role of Technologyin Growth
l. (a) Nonrivai.
Noncxclud$le,
Onet co.sndprio.ofNatiodalDefense,loes
nor
dininish dothefs consmption ofNalion.t Defense,md within a givencouniry.s
bordes,il is dimcdl b selectivetycxcludeorheNfiom consuningNalionatDetense.
SOLUTIONS CHAPTER 6
HUMAN CAPITAL
6.1 Eects of the invention of a vaccine against malaria. (See
accompanying g 6.1 in solutions-graphs-chap6.pdf.)
As we have seen, the causal link between health and income goes
both ways. Curve h(y) denotes the positive e
SOLUTIONS CHAP 4
1. As seen in chapter one, the formula is
(
g=
Xt+n
Xt
) n1
(
1=
6400000000
2
1
) 100000
1 = 0.000218888 = 0.0218%.
2. The graphs accompanying this answer are in the le solutions_graph_chap4b.pdf.
2.a) The initial equilibrium is at point
6.6 Exercises
183
state the country was initially, and for the speed by which the country converges to
steady state. The rate of convergence depends in a simple way on model parameters
and (ceteris paribus) it is smaller for the Solow model with human cap
Chapter 6
Solutions to Exercises
1. marts 2010
Exercise 1. One more empirical improvement obtained by adding human
capital
Excel spread sheet for this exercise: Chapter-06-Exc-01-Sol.
The fact that /(1 ) is the elasticity of yt wrt. sK , and the negative
Solutions:
Ex. 2.1
Any point in which an indierence curve has the slope parallel to the slope of the budget
line will have the property that w = M RS. Those that are out of the budget set are non
feasible (but would lead to higher IC, so higher welfare).
5.7 Exercises
149
higher level of steady state income and consumption. The general Solow model implies
the same golden savings rule as the basic Solow model: long-run consumption per
capita will be maximized when the savings rate equals the capital income
ECON 413
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ECON 413
Assignment #1
Due: 2:45pm September 28, 2016
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(that is, at 2:45pm sharp). Late assignments will not be accepted. You may work in groups of 1, 2
or 3. Th
ECON 413
Assignment #3
Due: 2:45pm March 30, 2016
Instructions: Assignments are due in class and at the beginning of class on the date indicated.
You may work in groups of 1, 2 or 3. The assignment submitted must include the names of all
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SOLUTIONS CHAP 3 WEIL 2nd ed
2. In the steady state, the growth rate of capital must be zero because investment in
capital is exactly offset by depreciation in capital. (Note: there is no population growth
here). If we let the investment rate be given by
EUR 1113 mlgnmtnt #1 DIR: 2:15pm Septmhtr 1?. 1016
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