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Consider the basic Solow growth model with a constant saving rate s, constant population growth at the rate n, and no technological change, and suppose that the aggregate production function takes the CES form in (2.38).
(a) Suppose that σ > 1. Show that in this case equilibrium behavior can be similar to that in Exercise 2.22 with sustained growth in the long run. Interpret this result.
(b) Now suppose that σ → 0, so that the production function becomes Leontief:
The model is then identical to the classical Harrod-Domar growth model developed by Roy Harrod and Evsey Domar (Harrod, 1939; Domar, 1946). Show that in this case there is typically no steady-state equilibrium with full employment and no idle capital. What happens to factor prices in these cases? Explain why this case is pathological, giving at least two reasons for why we may expect equilibria with idle capital or idle labor not to apply in practice.
Assume that a person's utility function is U(x,y)=x^2y^2 (yielding MRS=y/x) The price of X is $2 and the price of y is $5. Income is $100. What is the optimal choice? If a quantity tax of $0.50 is placed on good x, what is the new optimal choice
compute the opportunity cost in forgone tanks for each additional truck producedtruck output 0 1
Collectibles Corp. has a beta of 2.5 and a standard deviation of returns of 20%. The return on the market portfolio is 15% and the risk free rate is 4%. According to CAPM, what is the required rate of return on Collectible's stock
the supply curve for product x is given by qxs -520 20px .a. find the inverse supply curve.p qb. how much surplus
Kal Tech Engineering is investigating the possibility of acquiring new automated packaging equipment at a cost of $12,000. The equipment will have a salvage value of $1,000 at the end of its useful life of 10 years. It is determined by the plant e..
You and a classmate are assigned a project on which you will receive one combined grade. You each want to receive a good grade, but you also want to avoid hard work. In particular, here is the situation If both of you work hard, you both get an A, ..
you are asked to decided between two projects based on annual equivalent worth A B -$10,000 -$12,000 $6,000 $7,000 $5,000 $8,000 $4,000 a) what assumption do you need to make in comparing these mutually exclusive revenue projects
A stock was priced at $150 per share at the end of 2007. The following table shows dividends per share paid during each year and the price of the stock at the end of the year for the following four years: Dividends Paid Stock Price at Year During ..
You may need to play around with the numbers to make this work out.
Suppose the Government decides to subsidize exercise by $2 for every mile (Q) consumers run at a health club that charges by the mile. The current demand for running is Q=12-2p. The supply of miles available by the track owners is S=2p.
Write a brief Matters for Attention of Partners memo about Mneme Monos to your managing partner, Abderus Calliope, including a cover page.
If the unemployment rate stays two percentage points above full employment for an entire year, a. How many jobs will be lost in a labor force of 160 million b. If the average worker produces $100,000 of output, how much output will be lost
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