This question requires that you use the law of motion of capital, the production function, and the national income accounts identity. Suppose that a nation's production function is Y₁ = F(K₁,Lt)=KL)- You have the following information: The share of income paid to owners of capital a The rate of depreciation, 8 = 1 The savings rate s=15 The initial capital stock Ko=1 The labor supply, for all t20 is L=1 What is the long run level of consumption?
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- Would you expect capital deepening to result in diminished1etmns? Why or why not? Would you expect improvements in technology to result in diminished returns? Why or why not?Assume there are only two producing sector Y & Z in an economy. Calculatea) Gross value added at market price by each sector b) National income from the followings:Items Amount in CroresNet factor income from abroad- 20Sales by Y= 1000Sales by Z= 2000Change in stock of Z= -200C Closingstock of Y= 50 Opening stock of Y= 100Consumption of fixed capital by Y & Z= 180Indirect taxes paid by Y & Z= 120Purchase of raw material by Y= 500Purchase of raw material by Z= 600Exports by Z= 702) Consider an economy with depreciation 6=.2, saving rate s = .1. Worker productivity grows at rate g = .1. The economy starts with 5 units of capital per worker. The productivity function is given by: 2tnioq S) m6x9 grit no bazzim 23 0 2 2 19 0 f(k) = 3* k1/3 (1916978 zi 19verlɔirlw how to two lapiolandotdwong noitsluqoq TUOHTIW lebom wolo2011 ( The Marginal Product of capital is therefore 100037950 1 ritwong ytivitoub 1910 190 stign .6 MPK = 3* know 19q gniv brs (19) a. Using the above parameters, what is the golden rule steady state capital per (effective) worker? Please show your work below.
- as Figure 11-1 D Real GDP per hour worked, YIL v $40 IC 8 T 1 60 Production function, Production function, Production function, Capital per hour worked, KIL Refer to Figure 11-1. Diminishing marginal returns is illustrated in the per-worker production function in the figure above by a movement from Production function 1 to Production function 2 from Production function 2 to Production function 1. from Production function 1 to Production function 3. up along any of the production functionsA.9 Obtain the golden rule savings rate for an economy with a production function F(K,N) KN. How does an increase in the depreciation rate affect the golden rule savings rate?Assume that a country's production function is Y= AKº³Lº7. The ratio of capital to output is 3, the growth rate of output is 3 percent, and the depreciation rate is 4 percent. Capital is paid its marginal product. a. What is the marginal product of capital in this situation? (Hint: The marginal product of capital may be computed using calculus by differentiating the production function and using the capital-output ratio or by using the fact that capital's share equals MPK multiplied by K divided by Y.) b. If the economy is in a steady state, what must be the saving rate? (Hint: The saving rate multiplied by Y must provide for gross growth of (8 + n + g)K, where 8 is the depreciation rate.) c. If the economy decides to achieve the Golden Rule level of capital and actually reaches it, what will be the marginal product of capital? d. What must the saving rate be to achieve the Golden Rule level of capital?
- Using the law of motion for physical capital accumulation (K), what is the amount of capital for the next period if the amount of physical capital today is 20 and Investment is 15 (Assume a depreciation rate of 10%) a) 23 b) 33 c) 34 d) 35 3- Using the law of motion for physical capital accumulation (K), what is the steady state level of capital when investment is 10? (Assume a depreciation rate of 10% and remember that physical capital is constant at the steady state) a) 100 b) 50 c) 120 d) 123 4- What is the key difference between catching up growth and cutting edge growth? a) Cutting edge growth is based on capital accumulation while catching up growth is based on technological advances b) Cutting edge growth is based exclusively on natural resources unique to every country c) Cutting edge growth is based on innovation, new ideas. Catching up growth is based on physical capital accumulation d) None of the aboveEconomics, physical capital represents the uildings or machines used by a business to produce product. The marginal product of physical capital presents the rate of change of output product with spect to physical capital (informally, if you increase e size of your factory a little, how much more Foduct can you create?). articular model tells us that the output product Y is given, a function of capital K, by Y = AKªL'-a ere A is a constant, L is units of labor (assumed to be stant), and a is a constant between 0 and 1. Determine marginal product of physical capital predicted by this del. ned with CamScannerQUESTION 2 Assume we have a Cobb-Douglas production function of Y-KO505 Assume K-160, L-40, a-025, 6-0.10, and initial k-4.0. Derive the steady-state level of capital (k) (calculate unt Ak is at a level where the first 2 decimal points are 0. 1024
- 3 Assume a closed economy, perfectly elastic labor supply, and linear technology. Suppose the incremental capital-output ratio (ICOR) is 3, the depreciation rate is 3%, and the gross savings rate is 10%. Use the Harrod-Domar growth equation to determine the rate of growth. What would the gross savings rate have to be to achieve 5% growth? Assuming a perfectly elastic labour supply, state one criticism of this model from an exogenous growth theory viewpoint and another criticism of this model from an endogenous growth theory viewpoint.The Great Financial Crisis (GFC) mainly hit financing and hence theability of companies to finance investment, while the Corona crisis haspredominantly hit the labour input via the lockdown.! Calculate the impact of both crises on long-run growth assuming that thelabour share is 0.7 and the following information are given:– GFC: Growth rate of labour = 0%, Growth rate of capital= -5%, Growth rate of TFP =1%– Corona Crisis: Growth rate of labour = -5%, Growth rate of capital = 0%, Growth rateof TFP = 1%! Discuss whether and under what circumstances the lockdown will lead toa lower potential output in the long-run.! In the light of the growth accounting insights, what policies would yourecommend to revive growth after the lockdown?J 7 Given a production function Yt = AKt1 /3L2 /3 , if K0=8, A = 2, L = 4, s = 0.2, and d = 0.05: (a) Calculate the steady-state level of capital and output. (b) Calculate K1 , I 1 , Y1 and C1 .