ECO 2143 Study Guide - Ratia, Deductive Reasoning, Ais People
Document Summary
Partial answer key: assume that production is a function of capital and labor, and that the rate of savings, depreciation, population growth, and are all constant, as described in chapter 7"s version of the solow model. Further, assume that the production per effective worker can be described by the function: 24. 0 d n: solve for steady-state capital per worker, production per worker, and consumption per worker with s = 0. 8. Yes, it is possible to save too much, in the sense that long-run consumption could actually be higher if you saved less. Indeed, s = 0. 8 appears to be too high a savings rate, since steady state consumption per person is definite smaller with s = 0. 8 than with s = 0. 4. Notice that we can conclude this even without knowing what the population growth rate or the depreciate rate for the economy are. The golden rule level of capital is where mpk = n + .
