Question Set 1

1. What is the economic question the Solow growth model tries to explain and quantify?
2. Can capital accumulation generate sustained growth? Why or why not?
3. Work out the computation of the convergence rates I presented below, starting from the numbers in Year 1.

. Solow growth model predicts Year K Y K Y convergence in 9 years at a savings rate 1 0.192 0.576899828122963 0.192 0.576899828122963 of 20% 2 0.288179965624593 0.660522975164962 0.230489982812296 0.613127344182208 3 0.391466564095126 0.731529017658344 0.268753718949287 0.645334417011534 4 0.498625711217282 0.792972676239272 0.306411788755512 0.674168551942134 5 0.607357675343408 0.846866281257012 0.343187465074174 0.700127504035248 . But convergence in >80 years if 10% 6 0.71599516406047 0.894616072468451 0.378881468970281 0.72360427088976 savings rate 7 0.823318862148113 0.9372512357891 0.413353749162229 0.744915984797654 8 0.928437223091122 0.975552953261249 0.446509972725772 0.764323221472539 9 1.03070409143426 1.01013169913984 0.478291297600449 0.782043348089963 10 0.5086665026494 0.798260021801726 11 0.537625854564633 0.813130120205873 12 0.565176281 128757 0.826788909661168 13 0.591337543981998 0.839353974173852 14 0.616139187001183 0.850928253279476 15 0.639618093629012 0.861602426835765 16 0.661816526949687 0.871456812721303 17 0.682780555526849 0.880562895515195 18 0.702558789525684 0.888984571623787 19 0.721201367735494 0.896779173702861 20 0.738759148332231 0.903998321261693 21