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According to the neoclassical modelof economic growth with a Cobb-Douglas production function, the growth rate ofcapital per effective unit of labor is given byDk/k =ska -1- (d + n +g). For the US economy, s = 0.2, k/y = 2.5, δ= 0.04, α = 0.3, and the long-run real GDP growth is n +g = 0.03.Assume that the economy has reachedits steady state, Dk/k = 0.

1.What is the value of steady-state capital per EUL, k*?

2.If the savings rate drops to s = 0.15, what would be Dk/k this year?

3.If the savings is kept at s= 0.15for a long time, what would be the steady state value of k* under that situation???

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Macroeconomics, Economics

Category:- Macroeconomics
Reference No.:- M91255687

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