Solow model economy that begin with a capital stock equals
Course:- Business Economics
Reference No.:- EM13800477

Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
Assignment Help >> Business Economics

Consider the Solow model economy that begin with a capital stock equals to 300 billion and suppose its steady state level of capital is 500 billion. To its pleasant surprise, the economy receives a generous gift of foreign aid in the form of 100 billion worth of capital.

(a) Use Solow model to show what happen to economy immediately and over the long term. using the model equation determine by what preparation consumption initially rises and what happens to consumption in long run.

(b) Suppose instead of starting below its steady state, the economy begins in the steady state, with capital stock equals to 500 billion. Repeat the analysis for part (A) for this analysis.

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Business Economics) Materials
Consider a production possibilities frontier? (PPF) that is concave? (bowed outward from the? origin). Such a PPF displays increasing opportunity? costs, meaning that the cost
On December 31, 2012, the Bennett Company had 115,000 shares of common stock issued and outstanding. On July 1, 2013, the company sold 21,000 additional shares for cash. Benne
Show how it is possible for the source country to increase its per capita income after a group of workers immigrates to another economy even if the per capita income of the wo
Suppose the B-school has a help desk on campus where students can ask questions about their assignments in the MBA classes, and the desk is staffed by a single graduate studen
Harvey quit his job at State University where he earned $45,000 a year. He figures his entrepreneurial talent or foregone entrepreneurial income to be $5,000 a year. In the fi
Suppose a textbook monopoly can produce any level of output it wishes at a constant MC and AC of $5 per book. Assume that the monopoly sells its books in two different markets
Illustrate what is the minimum product price at which the firm will operate in the short-run. Elucidate how many workers should the firm employ to maximize profits.
Two firms are considering going out of business and selling their assets. Each considers what happens if the other goes out of business. The payoff matrix below shows the net