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Hello, I need help figuring out how to solve this question it was seen in class, but my professor didn't explain
Hello, I need help figuring out how to solve this question it was seen in class, but my professor didn't explain
how to get 2-4 so I am stumped.
The question is found below:
Consider the following numerical example using the Solow growth model. Suppose that
F(K, N) = zK 2/5N 3/5
where the capital depreciation rate is d = 10%, the savings rate is s = 0.25, the population growth rate is n = 7.50%, and the productivity is z = 1.5
1. Find the steady state per-capita capital stock (k*), output per capita (y*), and consumption per capita (c*).
2. Assume the economy is in the steady state of Question 1 and the government wants to implement a policy that will increase the long run per capita capital by 10%. Determine the percentage change in the population growth n that is required to achieve this goal.
3. Assume the economy is in the steady state of Question 1 and the government wants to implement a policy that will increase the long run per capita output by 10%. Determine the percentage change in the productivity z that is required to achieve this goal.
4. Assume the economy is in the steady state of Question 1 and the government wants to implement a policy that will increase the long run per capita consumption by 10%. Determine the percentage change in the savings rate s that is required to achieve this goal and get a higher level of per capita capital for the next generation.
Thank you in advance.
