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Macroeconomics questions Consider the following model based on Solow-Swan's model: AK1 2 0.101%, (1) Capital Dynamics =5}, (2) Goods Market Equilibrium 5:20.501'1, (3) Savings Function

Macroeconomics questions

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Consider the following model based on Solow-Swan's model: AK1 2 0.101%, (1) Capital Dynamics =5}, (2) Goods Market Equilibrium 5:20.501'1, (3) Savings Function Y1 _ 2K? 5, (4) Production Function II =0; + SE. (5 Income Function In the above equations, )1 stands for output in period t, K: stock of capital, It investment, St savings, and Cl consumption. (a) Derive the equilibrium capital accumulation equation. For an initial value ofthe capital stock K0 = 1 in period 0, calculate the values of Y0, So, and On in period 0 and K1, Y1, S1, and 01 in period 1. (4 marks) (b) Consider the economy at steady state and derive the equilibrium steady state values of K5, YE, I E and CE. (4 marks)

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