None Consider the Solow growth model with labor growth and no technologygrowth, i.e., n ‡ 0,x = 0. Output is created by a Cobb-Douglas produc-tion function combining Labor, Lt, and capital, Kt, such that output, Yisgiven byY₁ = A+ KL1-αFor a given time t, Given a level of Capital, and Investment, It, and adepreciation rate of capital, ɗ,the level of capital at time t+1 is given bythe following law of motion of capital-K++1 = Kt − 8Kt + ItThe labor growth rate in this economy is n = 2%, depreciation is 8 = 4%,the savings rate is s = 25%, and α = 0.3. Initial levels of capital, laborand technology are Ko=10, Lo=5, Ao=1 respectively. The economyis assumed to be closed with no government spending. What is the valuefor capital per worker at time t = 1?(a) 2.22 (b) 2.57 (c) 1.78 (d) 1.82

To solve for the value of capital per worker at time \( t = 1 \) using the Solow growth model, we…

Answered: Consider the Solow growth model with…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Explain in detail the difference between endogenous variables and Exogenous variables. Use an example for each from the Solow mode
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Assume that a country's production function is Y = K1/2L1/2 and there is no population growthor technological change.a. What is the per-worker production function y = f (k)?b. Assume that the country possesses 40,000 units of capital and 10,000 units of labor. What isY? What is labor productivity computed from the per-worker production function? Is thisvalue the same as labor productivity computed from the original production function?c. Assume that 10 percent of capital depreciates each year. What gross saving rate isnecessary to make the given capital–labor ratio the steady-state capital–labor ratio? (Hint:In a steady state with no population growth or technological change, the saving ratemultiplied by per-worker output must equal the depreciation rate multiplied by the capital–labor ratio.)d. If the saving rate equals the steady-state level, what is consumption per worker? Only D, other option answered

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