4. (25 points) Assume three Solow economies without technological progress and production function Y = K (EL) 1 . The share of labor income in total income equals 1/3. Each economy starts with capital per effective worker equal 100. Depreciation rate equals 1%, the growth in labor efficiency 1%, and savings rate equals 40% in each 2 economy. Economies differ only in the population growth rate: in country A it equals 2%, in country B it equals 3%, and in country C it equals 6%. (a) (5 points) For each economy, calculate steady-state values of capital per effective worker and output per effective worker. (b) (15 points) Using Excel (or other software of your choice), calculate how many years for each economy it would take to close half the distance from its initial output per effective worker to the steady-state value. Submit your Excel spreadsheet (or your program if you are not using Excel). Fill in the values for the table below (k and y are capital per effective worker and output per effective worker, respectively): Country k y y0 y y0 1 2 (y y0) approx. years to (1) (2) (3) (4) (5) reach y0+(5) A B C (c) (5 points) Briefly comment on how the population growth rate affects the speed of convergence of an economy to its steady state.

4. (25 points) Assume three Solow economies without technological progress and production function Y=K(EL)1. The share of labor income in total income equals 1/3. Each economy starts with capital per effective worker equal 100. Depreciation rate equals 1%, the growth in labor efficiency 1%, and savings rate equals 40% in each 2 economy. Economies differ only in the population growth rate: in country A it equals 2%, in country B it equals 3%, and in country C it equals 6%. (a) (5 points) For each economy, calculate steady-state values of capital per effective worker and output per effective worker. (b) (15 points) Using Excel (or other software of your choice), calculate how many years for each economy it would take to close half the distance from its initial output per effective worker to the steady-state value. Submit your Excel spreadsheet (or your program if you are not using Excel). Fill in the values for the table below ( k and y are capital per effective worker and output per effective worker, respectively): (c) (5 points) Briefly comment on how the population growth rate affects the speed of convergence of an economy to its steady state. 4. (25 points) Assume three Solow economies without technological progress and production function Y=K(EL)1. The share of labor income in total income equals 1/3. Each economy starts with capital per effective worker equal 100. Depreciation rate equals 1%, the growth in labor efficiency 1%, and savings rate equals 40% in each 2 economy. Economies differ only in the population growth rate: in country A it equals 2%, in country B it equals 3%, and in country C it equals 6%. (a) (5 points) For each economy, calculate steady-state values of capital per effective worker and output per effective worker. (b) (15 points) Using Excel (or other software of your choice), calculate how many years for each economy it would take to close half the distance from its initial output per effective worker to the steady-state value. Submit your Excel spreadsheet (or your program if you are not using Excel). Fill in the values for the table below ( k and y are capital per effective worker and output per effective worker, respectively): (c) (5 points) Briefly comment on how the population growth rate affects the speed of convergence of an economy to its steady state