Question
Assuming that South Korea and the United States were both in Solow-Swan steady state in 2019, and given the 2019 date in the table below,
Assuming that South Korea and the United States were both in Solow-Swan steady state in 2019, and given the 2019 date in the table below, answer the following questions assuming that the saving rate of South Korea suddenly changed(i.e, was shocked) to that of the United States in 2020.
variable South Korea United States (billion USD) savings 573 4011 GDP 1647 21,433
(a) At the time of the shock, would this shock move the South Korea economy out of steady state? If not why not? If so, would the shock result in the economy being above or below the steady state?
(b) would this shock increase, decrease, or have no effect on the time it would take for the South Korea economy to recover half way from economic shocks as described by the Solow-Swan model?
(c) Would this shock increase, decrease, or have no effect on the growth rate of per-capita income in the time shortly after the shock?
(d)If the growth rate of the labor force is 0.2%/year and the growth rate of labor efficiency is 1.5%/year, what will the growth rate of aggregate capital be in South Korea in the long run?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started