solow model

Question 1

solow growth model

Answer 1

The Solow–Swan model is an economic model of long-run economic growth. It attempts to explain long-run economic growth by looking at capital accumulation, labor or population growth, and increases in productivity largely driven by technological progress.

Question 2

production function total output

Answer 2

Yt = F(Kt, Lt) = AKtαLt1-α

Question 3

production function per worker

Answer 3

yt=f(kt)=Aktα

Question 4

production function assumptions

Answer 4

constant returns to scale, exogenous technology, full employment (L=population, grows at rate n)

Question 5

capital accumulation total

Answer 5

Kt+1=sYt+(1-S)Kt

Question 6

capital accumulation per worker

Answer 6

(1+n)kt+1=syt+(1-S)kt

Question 7

capital accumulation assumptions

Answer 7

no government expenditures, no trade, save a constant proportion s of output Y, full employment (L=population, grows at rate n)

Question 8

combining both per workers

Answer 8

(1+n)kt+1=sAktα+(1-S)kt

Question 9

diaganol line

Answer 9

(1+n)kt+1

Question 10

top curve

Answer 10

f(kt) = Aktα

Question 11

bottom curve

Answer 11

sAkαt + (1-S)kt

Question 12

k*

Answer 12

(sA/n+S) ^ 1/(1-α)

Question 13

y*

Answer 13

A(k*)^α

Question 14

accumulate more capital per worker

Answer 14

(1+n)k < sA(k)α + (1-S)k

Question 15

decumulate capital per worker

Answer 15

(1+n)k >sK(k)α+(1-s)k

Question 16

implications for growth

Answer 16

output per worker in equilibrium is constant, but the total output Y grows at rate n

Question 17

implications for savings

Answer 17

an increase of savings rate leads to higher steady state levels of k and y

Question 18

implications for population

Answer 18

high population growth rates lead to lower steady state levels of k and y

Question 19

income convergence

Answer 19

convergence of income per capita of poor countries to the level of rich countries, obtained by th ehigher growth of the former. the solow model of economic growth predicts income convergence

Question 20

area of trapezoid

Answer 20

(a+b/2)h

Question 21

gini

Answer 21

G - 1 - 2S