ECON 4020 Midterm: YorkMidt2007_3+solutions.pdf

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York university (cid:15)k = s(k)k(cid:11) (cid:0) (n + g + (cid:14))k, s(k) = bsk k + k(cid:11: the solow model [10 marks] Consider a solow model with cobb-douglas production, where capital per e ective worker evolves according to: where 0 < (cid:11) < 1. The novelty is that the saving rate, s(k), is a function of k, which we let take this form: (a) draw the graph of s(k) in a diagram with k on the horizontal axis. [5 marks: the diamond model [10 marks] We set the productivity factor at to unity (1) in all periods. The size of the young population in period t, denoted lt, grows at rate n, i. e. , Lt+1 = (1 + n)lt. lower-case letters denote per-worker terms, e. g. kt = kt=lt. (cid:11))k(cid:11) We assume cobb-douglas production and full depreciation ((cid:14) = 1), so that wt = (1 (cid:0) t , and 1 + rt = (cid:11)k(cid:11)(cid:0)1.

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