Calculate level of output worker at golden rule steady state
Course:- Business Economics
Reference No.:- EM13891910

Assignment Help
Assignment Help >> Business Economics

Consider a Solow economy with the following Cobb-Douglas production function:

Y = K a (AL)1-a

The capital share of output (a) is 25%, population growth (n) is 1.5%, and the depreciation rate (δ) is 4%. The economy is in steady-state with a growth rate of output per worker of 2% and a capital-output ratio (K/Y) of 3.5.

a. Calculate the saving rate in the initial steady state. Explain whether the economy is above or below its Golden Rule steady state equilibrium.

b. Calculate the level of output per worker at the Golden Rule steady state.

c. Calculate and compare the marginal product of capital (MKP=∂Y/∂K) in the initial steady state and at the Golden Rule steady state

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Business Economics) Materials
We observe that the equilibrium price of turkey meatball rises but the equilibrium quantity of beef meatball drops. Assume that turkey meatball and beef meatball are substitut
Earlier this year, Greek citizens, fearing currency changes or capital controls, took billions of euros out of their bank accounts. Some of it they sent to banks in other coun
Assume that you want to change careers to run a gourmet food truck - the career of your dreams. You use Chapter 7 from Everything Economics as a guide to help you to decide wh
According to the life-cycle/permanent income hypothesis, consumption depends on the present discounted value of income. An increase in the real interest rate will make future
Consider the following goods and services. Which are the most likely to be produced in a perfectly competitive industry? Which are not? Explain why you made the choices you di
A protective Tariff is often used by governments to attempt to control trade between nations to protect and encourage their undeveloped local industries, businesses. Using the
(Population growth but no technology growth) Consider an economy that 12 is described by the production function Y = K^1/3L^1/ 3.  What is the per-worker production function,
The mean of the number of sales of cars over a 3-month period is $87, and the standard deviation is 5. The mean of the commissions is %5225, and the standard deviation is $773