1-a 2. Neoclassical Model Calibration: For the neoclassical model with population growth we dis- cussed in class, let us consider a different utility function: u(q) = Other features are 1-a the same as those discussed in the lecture for the neoclassical model with technology growth. (a) What are the new equations that characterize the balanced growth path? Table 1: Targets for Calibration Capital/Output Ratio 4 Investment Share of Output 0.4 Labour Share of Output 0.6 Population Growth Rate Long-run Growth Rate of Output per worker 0.03 Discount factor 0.96 0.02 (b) Calibration: Use the information in Table 1 to calibrate the balanced growth path of the model, that is, solve for values of parameters (1, 2, B, n, 9, 8, a) of the model such that the balanced growth path equilibrium of the model reproduces these observations. Assume A0 = 1. (e) For the value of a determined in part (b), does the utility function exhibit diminishing marginal utility of consumption? Explain. 1 GECON-7103 Assignment 2 (d) Now using the parameter values from part (b), solve for the balanced growth path of this economy. What are the values of k and c in period 5 on the balanced growth path? 1-a 2. Neoclassical Model Calibration: For the neoclassical model with population growth we dis- cussed in class, let us consider a different utility function: u(q) = Other features are 1-a the same as those discussed in the lecture for the neoclassical model with technology growth. (a) What are the new equations that characterize the balanced growth path? Table 1: Targets for Calibration Capital/Output Ratio 4 Investment Share of Output 0.4 Labour Share of Output 0.6 Population Growth Rate Long-run Growth Rate of Output per worker 0.03 Discount factor 0.96 0.02 (b) Calibration: Use the information in Table 1 to calibrate the balanced growth path of the model, that is, solve for values of parameters (1, 2, B, n, 9, 8, a) of the model such that the balanced growth path equilibrium of the model reproduces these observations. Assume A0 = 1. (e) For the value of a determined in part (b), does the utility function exhibit diminishing marginal utility of consumption? Explain. 1 GECON-7103 Assignment 2 (d) Now using the parameter values from part (b), solve for the balanced growth path of this economy. What are the values of k and c in period 5 on the balanced growth path