TABLE OF CONTENTS

Question 1 of 2

Work It Out
true
true
You must read each slide, and complete any questions on the slide, in sequence.

Consider an economy described by the production function:

Y = F(K, L) = K0.3L0.7.

What is the per-worker production function?

Review pages 60-62 in Chapter 3 for a discussion of the Cobb-Douglas production function and Section 7-1 for a discussion of the per-worker production function and steady-state equilibrium in the Solow growth model.

Assuming no population growth or technological progress, find the steady-state capital stock per worker, output per worker, and consumption per worker as a function of the saving rate and the depreciation rate.

k* = _________

Review pages 60-62 in Chapter 3 for a discussion of the Cobb-Douglas production function and Section 7-1 for a discussion of the per-worker production function and steady-state equilibrium in the Solow growth model.

y* = _________

Review pages 60-62 in Chapter 3 for a discussion of the Cobb-Douglas production function and Section 7-1 for a discussion of the per-worker production function and steady-state equilibrium in the Solow growth model.

c* = _________

Review pages 60-62 in Chapter 3 for a discussion of the Cobb-Douglas production function and Section 7-1 for a discussion of the per-worker production function and steady-state equilibrium in the Solow growth model.
Review pages 60-62 in Chapter 3 for a discussion of the Cobb-Douglas production function and Section 7-1 for a discussion of the per-worker production function and steady-state equilibrium in the Solow growth model.
WIO_Mankiw_Chapter08_Question03_01
Video Player is loading.
Current Time 0:00
Duration 0:00
Loaded: 0%
Stream Type LIVE
Remaining Time 0:00
 
1x
    • Chapters
    • descriptions off, selected

      Consider an economy described by the production function:

      Y = F(K, L) = K0.3L0.7.

      Assume that the depreciation rate is 5 percent per year. Make a table showing steady-state capital per worker, output per worker, and consumption per worker for saving rates of 0 percent, 10 percent, 20 percent, 30 percent, and so on. Round your answers to two decimal places. (You might find it easiest to use a computer spreadsheet then transfer your answers to this table.)

      Steady State Values for Various Saving Rates
      s k* y* c*
      Depreciation Rate: 0.0
      (0.05) 0.1
      0.2
      0.3
      0.4
      0.5
      0.6
      0.7
      0.8
      0.9
      1.0

      What saving rate maximizes output per worker? What saving rate maximizes consumption per worker?

      A saving rate of percent maximizes output per worker. A saving rate of percent maximizes consumption per worker.

      Review Section 7-2 and Table 7-3 for an analysis of the determinants of steady states in the Solow growth model and for a discussion of the Golden Rule steady state that maximizes consumption per worker.

      Use information from Chapter 3 to find the marginal product of capital. Round your answers to three decimal places. Add to your table the marginal product of capital net of depreciation for each of the saving rates.

      s k* y* c* MPK* - d
      Depreciation Rate: 0.0 0.00 0.00 0.00
      0.05 0.1 2.69 1.35 1.21
      0.2 7.25 1.81 1.45
      0.3 12.93 2.16 1.51
      0.4 19.50 2.44 1.46
      0.5 26.83 2.68 1.34
      0.6 34.81 2.90 1.16
      0.7 43.38 3.10 0.93
      0.8 52.50 3.28 0.66
      0.9 62.12 3.45 0.35
      1.0 72.21 3.61 0.00
      Table
      3:52
      Video Player is loading.
      Current Time 0:00
      Duration 0:00
      Loaded: 0%
      Stream Type LIVE
      Remaining Time 0:00
       
      1x
        • Chapters
        • descriptions off, selected
        • captions off, selected