Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Assume there is a second economy ( country B ) with everything identical to country A except for the rate of population growth , which is 2 percent . Answer the following questions for country B.
Assume both countries start a k = 0 , which country grows more in the short run ( before steady state is reached ) , as given by the rate of growth of output per worker ?
( hint : the further away from steady state , the faster the growth towards it ).
O. Country A
O. Same for both
O. Country B
![1-a
Y = F (K, L) = AK (LE), with a = 0.4 and A = 1
The rest of the economy is characterized by our usual identity
Y = C +I,
a savings rate of 48% (s = 0.48), a depreciation rate of 2% (
8 = 0.02), a ate of population growth of 1% (n = 0.01), and a
rate of labor-augmenting technological change of 3% (g = 0.03).
Use the following notation conventions:
Y
• y = 1 - per-worker income
K
k
- per-worker capital
L
C
- per-worker consumption
• C=
I
- per-worker investment
%3D
L
EL - per-effective-worker income
K
EL
C
per-effective-worker consumption
k
- per-effective-worker capital
• C
EL
EL
- per-effective-worker investment](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd4d621a8-148b-4499-ac80-96b80649c69b%2Fd681a678-4e72-4d23-bcc8-3d2a30dbe9a2%2Fehhn915_processed.jpeg&w=3840&q=75)
Transcribed Image Text:1-a
Y = F (K, L) = AK (LE), with a = 0.4 and A = 1
The rest of the economy is characterized by our usual identity
Y = C +I,
a savings rate of 48% (s = 0.48), a depreciation rate of 2% (
8 = 0.02), a ate of population growth of 1% (n = 0.01), and a
rate of labor-augmenting technological change of 3% (g = 0.03).
Use the following notation conventions:
Y
• y = 1 - per-worker income
K
k
- per-worker capital
L
C
- per-worker consumption
• C=
I
- per-worker investment
%3D
L
EL - per-effective-worker income
K
EL
C
per-effective-worker consumption
k
- per-effective-worker capital
• C
EL
EL
- per-effective-worker investment
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