1 consider how unemployment would affect the solow growth

Reference no: EM13373742

1. Consider how unemployment would affect the Solow growth model. Suppose that output is produced according to the production function, where K is capital, L is the labor force, and u is the natural rate of unemployment which in this case is 6%. The national saving rate is 20%, the labor force grows at rate 4%, and capital depreciates at rate 10%.

a. Express output per worker (y=Y/L) as a function of capital per worker and the natural rate of unemployment.

b. Write an equation that describes the steady state of this economy.

c. Suppose that some change in government policy reduces the natural rate of unemployment to 5%. Describe how this change affects output both immediately and over time. Is the steady state effect on output larger or smaller than the immediate effect?

2. Suppose and economy described by the Solow model has the following production function:

a. For this economy, what is f(k)?

b. Use your answer to part a to solve for the steady state value of y as a function of s, n, g, and δ.

c. Two neighboring economies have the above production function, but they have different parameter values. Atlantis has a saving rate of 25% and a population growth rate of 2% per year. Xanadu has a saving rate of 10% and a population growth rate of 5% per year. In both countries, g=0.02 and δ=0.04. Find the steady state value of y for each country.

Reference no: EM13373742

Questions Cloud

Dscribe the segmenting and pre-training principles : describe the segmenting and pre-training principles. evaluate which learners would benefit most from pre-training.

Nbspyou will write a 750-words about 3-4-pages essay that : nbspyou will write a 750-words about 3-4-pages essay that compares and contrasts two stories from the fiction unit.

Worked examples are step-by-step demonstrations of how to : worked examples are step-by-step demonstrations of how to perform a task or solve a problem and can be invaluable to

1 select an organization state the nature of this interest : 1. select an organization state the nature of this interest in your memo. it can be a publicity owned comapny a

1 consider how unemployment would affect the solow growth : 1. consider how unemployment would affect the solow growth model. suppose that output is produced according to the

Bull select at least one poem and one work of fantasy : bull select at least one poem and one work of fantasy literature from two different cultural traditions.nbspbull write

Write a bad newsletter to a customer who has requested an : write a bad newsletter to a customer who has requested an exemption to a companys policy. possible requests that

1 suppose there are two consumers a and bthe utility : 1. suppose there are two consumers a and b.the utility functions of each consumer are given byuaxy xyubxy

English essaynbspfriendship in the internet agenbsp write a : english essaynbspfriendship in the internet age.nbsp write a 5-6 page research paper discussing and debating the topic.

User Account

All Pages