Question
Please answer ALL subquestions and draw graphs as asked in detailed steps please! Thank you! Condition: This question is about Cobb-Douglas production function in combination
Please answer ALL subquestions and draw graphs as asked in detailed steps please! Thank you!
Condition: This question is about Cobb-Douglas production function in combination with Solow growth model. Given = 1/3 as capital share, s as constant saving rate, as constant depreciation rate, n as constant population growth rate, and given 0 < s, and n < 1. Initial TFP is given as A1 > 0. Then the productivity increases 10% to a new value A2.
Question:
a. Please draw 3 graphs to show: 1. the evolution of productivity from A1 to A2 through time. 2. capital per capita Kit. 3. output per capita Yit. On all 3 graphs, please include steady state before stock, the shock time, transition to final steady state and the final steady state. And please elaborate on the difference between and after the increase in productivity
b. Then let us assume that the economy successfully achieved a new steady state, then please compute a growth accounting exercise on output per capita, and explain what portion of change in output per capita is because of productivity change, and what portion of change in output per capita is because of capital per capita change. Does this result corresponds to what actually happened?
c. Capital accumulation is the main reason for robust growth for East Asian economies last century. True or false? Please elaborate in detail.
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