1. Many demographers predict that the United States will have zero annual population growth in the 21st century, in contrast to one percent annual population growth that occurred in the 20th century. Use the Solow Model (without technological advancement) to predict the effect of this slowdown in population growth on the steady state:
a) level of output per person
b) economic growth rate
2. Assume no technological progress. Draw the Solow Growth Model. This should include (in per-worker terms), the production function, the savings (i.e., investment) function, and break-even investment function. Label everything appropriately
a) Label the steady-state levels of capital per worker and output per worker as k*0 and y*0, respectively
b) Suppose population growth increases. Show this change on your graph. Label the new steady-state levels of capital per worker and output per worker as k*1 and y*1 , respectively
c) Explain what happens to the economic growth rate gY in the transition from y*0 to y*1 (i.e., is it negative, zero, or positive and why?)
d) Explain what happens to the economic growth rate gY at y1* (i.e., is it negative, zero, or positive and why?)
3. In this model, we incorporate population growth and labor- augmenting technological progress.
Y = F (K, LE) Answer the following:
a) What does E represent? What does g represent?
b) What does k represent? What does y represent?
c) Write the central dynamical equation of the Solow model. Briefly explain what it describes.
d) What is the equation that defines the steady-state level of capital per effective worker? (i.e., how would you determine k*?)
e) How would you determine the steady-state level of output per effective worker? (i.e., how would you determine y*?)
4. Draw the Solow Growth Model including population growth and technological grown. This should include (in per effective- worker terms): the production function, the investment function, and break- even investment function. Label everything appropriately. Label the steady-state level of capital per effective worker and output per effective worker as k* and y*, respectively
1. Many demographers predict that the United States will have zero annual population growth in the 21st century, in contrast to one percent annual population growth that occurred in the 20th century. Use the Solow Model (without technological advancement) to predict the effect of this slowdown in population growth on the steady state:
a) level of output per person
b) economic growth rate
2. Assume no technological progress. Draw the Solow Growth Model. This should include (in per-worker terms), the production function, the savings (i.e., investment) function, and break-even investment function. Label everything appropriately
a) Label the steady-state levels of capital per worker and output per worker as k*0 and y*0, respectively
b) Suppose population growth increases. Show this change on your graph. Label the new steady-state levels of capital per worker and output per worker as k*1 and y*1 , respectively
c) Explain what happens to the economic growth rate gY in the transition from y*0 to y*1 (i.e., is it negative, zero, or positive and why?)
d) Explain what happens to the economic growth rate gY at y1* (i.e., is it negative, zero, or positive and why?)
3. In this model, we incorporate population growth and labor- augmenting technological progress.
Y = F (K, LE) Answer the following:
a) What does E represent? What does g represent?
b) What does k represent? What does y represent?
c) Write the central dynamical equation of the Solow model. Briefly explain what it describes.
d) What is the equation that defines the steady-state level of capital per effective worker? (i.e., how would you determine k*?)
e) How would you determine the steady-state level of output per effective worker? (i.e., how would you determine y*?)
4. Draw the Solow Growth Model including population growth and technological grown. This should include (in per effective- worker terms): the production function, the investment function, and break- even investment function. Label everything appropriately. Label the steady-state level of capital per effective worker and output per effective worker as k* and y*, respectively
