ECON 702 Midterm: ECON702 MidtermSpring2013Solution
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Instructions: this is closed book, closed notes exam, no calculators of any kind are allowed, show all the calculations, if you need more space, use the back of the page, fully label all graphs. Consider the solow model, briefly described as follows. , where f has all the properties of the. , where is the depreciation rate and. 1 t t t ti is aggregate investment. People save a fraction s of their income. Thus, the total saving and total investment in this economy is. I t t sy t population of workers grows at a constant rate of n, which is exogenous in this model. L t: let be capital per worker. Prove that output per worker can be expressed as a function of tk only, i. e. ( tkf. The second step follows from the assumption that f has constant returns to scale (crs). )1, t t: the following graph plots certain flows for the solow model.
