Question
Consider the steady state of the Solow model with physical capital (saving/investment) and population growth. Now consider the country Singapore and answer the following questions:
Consider the steady state of the Solow model with physical capital (saving/investment) and population growth. Now consider the country Singapore and answer the following questions: a. Assuming = .4, and different investment rates, what is the predicted relative output difference between Singapore and France all else the same? Is this close to the actual relative difference? Show your work and derivations.
2 b. Assuming = .4 and depreciation rate = .02, and different population growth rates, what is the predicted relative output difference between Singapore and France all else the same? Is this close to the actual relative difference? Show your work and derivations.
c. In total, what fraction of the output difference between the country you have chosen and France is explained by the two proximate causes according the Solow model? How much is left unexplained? Again show your work.
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