Assume in this country they save depreciation of capital

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Reference no: EM1320845

Q. Consider a country in which Y = 200 K^(2/5)N^(3/5) Assume in this country they save 20% of their income, population grows at 3% every year also depreciation of capital occurs at 10% every year. Utilize the Solow model.

a. Compare the effectiveness of
i) a 50% increase in the savings rate (to 30%),
ii) a 67% decline in the population growth rate (to 1%) also
iii) a 10% increase in productivity (to 220). That is, for each, give the percent by which it increases long-run average income (y*) also long-run average consumption (c*)

b. Give one policy each that could be undertaken to accomplish i)-iii). Which policy has the greatest impact on long-run well-being (assuming each policy has zero costs)?

Reference no: EM1320845

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