The economy is in the steady state, Microeconomics

Assume in the Solow growth model that s=.25, n=.02, d=.08, and f(k)=k^3.

A)    Assume that z=2.  What is the steady state level of capital per worker and consumption per worker?

B)    Now, Assume that initially z=2 and the economy is in the steady state you measured in part (a).  Then assume that z falls to 1.8 permanently.  What is the new steady state?  Explain capital per worker and output per worker in every of the first 10 period after z falls, and Discuss this in a figure.

C)    Now, assume alternatively that z=2 initially the economy is in the steady state, and then z falls to 1.8, but now for only 10 periods.  Then, z=2 forever.  Explain the path followed by capital per worker and output per worker in the first 10 periods after z falls.  Again, show this in a figure.

D)    What conclusions can you draw from your results in part (a) through (c)? Discuss.

Posted Date: 3/19/2013 5:42:46 AM | Location : United States







Related Discussions:- The economy is in the steady state, Assignment Help, Ask Question on The economy is in the steady state, Get Answer, Expert's Help, The economy is in the steady state Discussions

Write discussion on The economy is in the steady state
Your posts are moderated
Related Questions
Is it possible for a firm to experience a technological change that would increase the marginal product of labor while leaving the average product of labor unchanged?

Why total product continues to increase despite a decrease in the marginal product?

is it just assumed that a monopoly graph is showing economic profit instead of accounting profit

Steel and aluminum production Steel Canada 500, France 1200 Aluminum Canada 1500, France 800 The maximum amount of steel or aluminum that Canada and France can produce if they full

Surplus: Anysector or agent in economy (business, householdor government) experiences a surplus when its income surpasses its expenditure. Surplus, Economic: For the economy

The demand for every productive resources is a derived demand.  By derived demand it is meant that it is the output of the resource and not the resource itself for which is a deman

Individual Demand * The Individual Demand Curve  - Two significant Properties of Demand Curves - 1) The level of utility which can be attained changes while moving along

The Industry's Long-Run Supply Curve * Long-Run Elasticity of Supply   1) Constant-cost industry Long run supply is horizontal Small increase in price will induc

Reasons for International Trade?

Features of monopolistic competition: Large number of firms in the industry. There are many small firms each supplying only a small share of the total market output. Hence, no