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
Bayer Schering Pharma AG, Germany owns Alka-Seltzer, which was launched in 1931 and was meant for relief of minor aches, pains, inflammation, fever, headache, heartburn, sour
A picture is worth a thousand words. We’ve heard that often but seldom consider the impact the visual media has on the written text. This is especially true in business messag
Two similar surgeries, breast reconstruction and breast augmentation, have different prices. Breast augmentation is cosmetic surgery not covered by health insurance. Patients
Discuss current and recent interest rates. Some possible discussion topics are the following: What has been the trend of interest rates over the last 1 mth, 6mths, 12 mths, 24
Scenario 20.2 Suppose labor productivity differences are the only determinants of comparative advantage, and both Egypt and Ghana produce only corn and cocoa. In Egypt, 10 bus
Using the general model of the monetary approach to exchange rate determination, consider the following scenario: Assume that real income grows at a rate of 3% in both the hom
What are equilibrium price and quantity? Suppose actual prie is $92, What is quantity and supply demanded at this price? At price of $92, wil there be a shortage or surplus? W
Between 2007 and 2011 the federal budget deficit grew from $160.7 billion to $1,299.6 billion, and the national debt grew from $8.9 trillion to $14.8 trillion. In your post, d