Consider following information from the Solow model in a continuous time, 𝒚 = 𝟐𝒌
𝟐 − 𝟒𝒌,
𝒌̇ = 𝒔𝒇(𝒌) − (𝒈 + 𝒏 + 𝜹)𝒌, 𝒚 = 𝒄 + 𝒊, where 𝒌 =
𝑲
𝑨𝑳
, g-is growth of technology, n-is labor force
growth rate, and 𝜹- is rate of depreciation. Answer the following questions-
(i) What are the assumptions this production function violates? (1 Mark)
(ii) Find out the steady state and golden rule solution of 𝑘
∗
, 𝑦
∗
, 𝑐
∗
? (2 Marks)
(iii) Find out the steady state and golden rule solution of per capita capital, output ratio and
consumption?
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