1. According the
Solow model, when is a country’s economy growing?
Technology progress.
2. In the notes we
assumed that the coefficient on the Cobb-Douglas production function had a
value of 1. But, for the sake of this question, assume it increases from 1 to a
value of 1.5. Describe what would happen in our graph.
It would become taller (1.5 times in height than the
original)
3. Consider two
countries that have the same values of α
of 1/3 and the same value of δ.
Country A has a value of γ of
.40 and Country B has a value of γ of .10. Country A has per worker income twice that of Country B – true
or false? Explain your answer.
You have to specify what the notation means.
If gamma is the depreciation rate, then no the
income relationship is not linear.
4. Say that the
government of a country uses the Solow model to understand how to increase per
worker income. Which parameter is easiest to change to increase per worker
income?
Capital per person (capital deepening)
5. What is the
impact of δ on the steady-state
solution of the Solow model? Why is this?
Again, you have to specify the notation. If delta is the population growth, it decides
where steady state in at the diagram.
No comments:
Post a Comment