ECON 402 Lecture 9: Chapter 8.2

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ECON 402 Lecture 8: Chapter 8.1

ECON 402 Lecture 9: Chapter 8.2

ECON 402 Lecture Notes - Lecture 10: Keynesian Cross, Aggregate Demand, Aggregate Supply

Document Summary

= 1 / 2 1 / 2. And we can substitute y = y/l and k = k/l y = f(k) = k^1/2. Solow model predicts with higher rates of saving will have higher level of capital and income per-worker in long run. However, this may not match with real work condition. Different values of s lead to different states and we need to find out the best state. The best steady state per person given: c* = (1 s) f(k*). With increase in s: higher k* and y* and raises c, reduces consumption"s share of income (1 s), and lowers c*. Lets define k*gold = the steady state of k that maximizes consumption. c* Break-even investment ( + n)k => the amount necessary to keep k constant: k to replace capital as it wears out, nk to equip new workers. K = s f(k) ( + n) k.

Related Questions

Country A has the production function: Y = F (K, L) = K^0.5L^0.5

a. Express the production function in per worker terms. Thus, y = f (k) where y = Y/L and k=K/L

b. Suppose that both countries start off with a capital stock per worker of 2 (i.e. k = 2). What are the levels of income per worker and consumption per worker? Illustrate this on a graph

c. Assume that neither country experiences population growth or technological progress. Assume further that country A saves 10 percent of its output and the stock of capital depreciate by 5 percent each year. Using your answer from part (a) and the steady-state condition that investment equals depreciation

i. Find the steady-state level of capital per worker for each country.

ii. Find the steady-state levels of income (output) per worker and consumption per worker for each country

iii. Show on a graph the steady-state capital stock per worker, output per worker and consumption per worker for each country

d. State the condition for the Golden Rule and find the Golden Rule level of capital.

silverbeetle747

Consider an economy with the following production function:

Y = ( K, L) = K^0.4L^0.6

A) What is the per-worker production function?

B) Assume that the L is constant; find the steady-state capital per worker, output per worker, and consumption per worker as a function of the saving rate and deprecitation rate.

C) What is the Golden Rule level of capital, k*gold?

D) What is the Golden Rule level of consumption, c*gold?

E) What is the corresponding saving rate, s*gold?

Show all work neatly.

raspberrywater-buffalo513

Country A and country B both have the production function:

Y = F(K,L) = K^(1/3)L^(2/3).

a) Does this production function have constant returns to scale? Explain.

b) What is the per-worker production function, y = f(k)

c) Assume that neither country experiences population growth nor technological progress and that 20-percent of capital depreciates each year. Assume further that country A saves 10% of output each year and country B saves 30% of output each year. Using your answer from part (b) and the steady-state condition that investment equals depreciation, find the steady-state level of capital per worker for each country. Then find the steady-state levels of income per worker and consumption per worker.

d) Suppose that both countries start off with a capital stock per worker of 1. What are the levels of income per worker and consumption per worker?

marooncrab607

ECON 402 Lecture 9: Chapter 8.2

ECON 402 Lecture 8: Chapter 8.1

ECON 402 Lecture 9: Chapter 8.2

ECON 402 Lecture Notes - Lecture 10: Keynesian Cross, Aggregate Demand, Aggregate Supply

Document Summary

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