ECON 2000 Chapter Notes - Chapter 8: Savings Account, E Number, Real Wages

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limegoldfish227

16 May 2016

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We now write the production function as y = f(k, l x e) L x e = number of effective workers. E is a variable called the efficiency of labour. An increase in e are analogous to increases in the labour force l (labour-augmenting) g is the rate at which the efficiency of labour grows the rate of labour-augmenting technological progress. Because the labour force l is growing at rate n, and the efficiency of each unit of labour. Once the economy is in steady state, the rate of growth of output per worker depends only on the rate of technological progress. According to the solow model, only technological progress can explain sustained growth and persistently rising living standards. The golden rule level of capital now occurs at the point where: At the golden rule level of capital, the net marginal product of capital, mpk - , equals the rate of growth of total output, n + g.

Related Questions

Suppose that the production function is y=k^a, where y and k denote production per unit of effective labor and capital per unit of effective labor, respectively. Suppose also that the saving rate, the depreciation rate, the growth rate of the population and the rate of technological progress are s, q, n and g, respectively.

a) what is the condition that characterizes the steady-state?

b) What are the growth rates of production per unit of effective labour, of production per worker, and of total production in steady-state?

c)If a=0.3, q=0.05, n=0.02, g=0.03, k/y=3, and the econmy is in steady-state, what is the saving rate?

d0 What is the marginal product of capital?

Suppose the output per effective worker is production function is y=10k^1/2, where k equals the amount of capital per effective worker and the capital lasts an average of 10 years. Assume that the saving rate is 32 percent, the rate of growth of population is 4 percent and the rate of technological growth is 2 percent.

a) Solve for the steady state levels of capital per effective worker, output per effective worker, investment per effective worker and consumption per effective worker.

b) Calculate the growth rate of total capital income and the growth rate of total labor income at the steady state.(Hint: Capital and labor each earn a constant share of the economy's income ).

c) Prove, at the steady state, (i) the capital-output ratio is constant;(ii) the real wage grows at the rate of 2 percent.

d) Calculate all of the following at their Golden Rule levels: Capital per effective worker, output per effective worker, saving and investment per effective worker, and the consumption per effective worker.

e) Whether the saving rate is too high or too low?

crimsonhound401

A country is described by the Solow Model with a production function y =k1/2. Now suppose k is equal to 400. Now suppose that the fraction of output invested (or saved) is 50%. Assume that the depreciation rate is 5% and population growth is 0%.

Is the country at its steady-state level of output per worker above the steady-state or below the steady-state? Show how you reached your conclusion.

harlequinmanatee527

ECON 2000 Chapter Notes - Chapter 8: Savings Account, E Number, Real Wages

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