Homework 2 - Solow M X + Homeworks 2029620-%20Solow%20Model S20Technological%20Change20and%20Growth%20Accounting pdf - + fit to page Page View A Read along 2. Changes in Savings Rate Suppose the savings rate in the economy above changes from 3 to 8). Show the effect of the change on the Solow diagram What will happen to the long run value of capital per work R* and income per worker y* and the growth rates of these two variables. 3. Consider an economy with the following characteristics: savings = sk depreciation = ok In the Solow Growth chapter, Mankiw estimates that for the United States, 8.04 and the average savings rate in the U.S. over the last 30 years is s=,068. Using these values, create a spreadsheet that runs for 400 periods that contains the following information in period 1. Period savings depreciation Y We begin by assuming that capital per person is 1.15. This will grow over time based upon the difference between savings and depreciation. We also assume that there are 100 people in the economy for each year and this will not change. Fill in the rest of the blanks with the formulas from the model. Do this for 400 time periods, using the copy feature in Excel a) Given =0.068, and 8=0.04, find the steady state value of k and y using the formulae from the model b) After 400 periods, has k and y reached their steady state levels? c) What is the growth rate of total output (Y) between period 1 and period 400. Compare this to the growth rate between periods 1 and 10 (11) periods 391 and 400. Which subperiods grow faster? Why? d) wuppose now labor grows at 0.5% per year. Redo the 400 periods and calculate the growth rate from period 1 to period 400. How does the growth rate compare with the original model? Homework 2 - Solow M X + Homeworks 2029620-%20Solow%20Model S20Technological%20Change20and%20Growth%20Accounting pdf - + fit to page Page View A Read along 2. Changes in Savings Rate Suppose the savings rate in the economy above changes from 3 to 8). Show the effect of the change on the Solow diagram What will happen to the long run value of capital per work R* and income per worker y* and the growth rates of these two variables. 3. Consider an economy with the following characteristics: savings = sk depreciation = ok In the Solow Growth chapter, Mankiw estimates that for the United States, 8.04 and the average savings rate in the U.S. over the last 30 years is s=,068. Using these values, create a spreadsheet that runs for 400 periods that contains the following information in period 1. Period savings depreciation Y We begin by assuming that capital per person is 1.15. This will grow over time based upon the difference between savings and depreciation. We also assume that there are 100 people in the economy for each year and this will not change. Fill in the rest of the blanks with the formulas from the model. Do this for 400 time periods, using the copy feature in Excel a) Given =0.068, and 8=0.04, find the steady state value of k and y using the formulae from the model b) After 400 periods, has k and y reached their steady state levels? c) What is the growth rate of total output (Y) between period 1 and period 400. Compare this to the growth rate between periods 1 and 10 (11) periods 391 and 400. Which subperiods grow faster? Why? d) wuppose now labor grows at 0.5% per year. Redo the 400 periods and calculate the growth rate from period 1 to period 400. How does the growth rate compare with the original model