21 Jul HOW MANY PERIODS IT TAKES TO REACH EQUILIBRIUM?
You may use a spreadsheet program for the following problem. If you do use a spreadsheet each colum Show more You may use a spreadsheet program for the following problem. If you do use a spreadsheet each column will be a separate variable (e.g k y s the steady state line etc.). a) Graph the Solow Growth model in per capita terms using the following parameters: Initial Labor Force/Population: N=10 Aggregate Production function: Y=10K^1/3 N^2/3 Growth Rate of Labor Force/Population: gN =0.025 Depreciation Rate of Capital: d=0.1 Marginal Propensity to Save: s=0.2 To derive this graph write the model in per capita terms. The X-axis should be k the capital to labor ratio (K/N). Graph y (per capita income) i (per capita investment = per capita savings (sf(y)) plus per capita aid if any) and the steady-state investment line for k ranging from 0 to 80. i) Find the equilibrium values of: 1) capital to labor ratio (k*); 2) output per capita (y*); 3) consumption per capita (c*). ii) Is the savings rate above or below the Golden Rule level? What advice could you give on the basis of this observation? (HINT: you can figure out the Golden Rule level via calculus or by including a column with y minus the steady-state line). iii) If a donor gives 64 in aid as a 1 time contribution what is the impact on the equilibrium values of 1) capital to labor ratio (k) 2) output per capita (y) 3) consumption per capita. b) Using the same parameters above plus K1=270 construct a dynamic model using a spreadsheet. In year 1 K1=270 N1=10 Y1=10(270)^1/3 (10)^2/3 S1=.2Y1=20(270)^1/3(10)^2/3 I1=S1+B1 (B is aid initially blank). In year 2 K2=(13d)K1+I1= .9(270)+20(270)^1/3(10)^2/3 N2=(1+gN)N1=1.025(10) etc. You will want to include the per capita functions (k y s etc.). Note that each of these variables will be a separate column with the first column being t or year. i) How many periods it takes to reach equilibrium? Assume you have reached equilibrium when y*3yt < 0.2 where y* is the equilibrium value from a)i) above and yt is the value from your spreadsheet for this question. (You can include another column to calculate this gap.) ii) How quickly will this same level of output per capita be reached if: 1) In year 1 donors give aid of 300? (Amount is aggregate not per capita.) 2) Every year donors give aid of 3? Assume aid is added to savings to finance investment. iii) Suppose donors give 30 each year forever (again the amount is aggregate not per capita). What happens in the short run (20 years)? What happens in the long run (100+ yearsreal equilibrium)? Explain why we see this pattern. This is easiest to see in a graph of t vs. y. NOTE: For spreadsheet work include graphs (time (t) versus y) where appropriate. Show less
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.