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Compute compute the change in the capital-labor ratio

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a) Consider an economy with a saving rate s¯=0.15, a depreciation rate d¯=0.08, and a population growth rate n¯=0.015. The total factor productivity is A¯=7.5, and the capital income share is α=0.3. If the economy has 1,000 workers in 2021 and 35,000 units of capital in that same year, you know that the economy is [ Select ]["below", "at", "above"] its steady-state, and GDP per capita is growing at [ Select ]["a negative rate in 2020", "The same rate as in 2020", "a positive rate in 2020", "a rate of 0% in 2020"].

b) Now, assume that the population growth rate decreases to 1 percent per year due to new restrictions on immigration. Compared to the growth rate of GDP per capita in the previous question, you know that the growth rate of GDP per capita in 2020 is [ Select ]["lower", "the same", "higher"], assuming that all other parameters, the total number of workers, and the capital stock remain unchanged.

c) Compute the change in the capital-labor ratio, i.e. Δkt+1, between 2020 and 2021. Round your answer to the nearest hundredth.

d) Compute the growth rate of kt between 2020 and 2021 as a percentage. Round your answer to the nearest tenth of a percent.

e) Use your previous answer to compute the growth rate of yt (GDP per capita) between 2020 and 2021 as a percentage. Round your answer to the nearest tenth of a percent.

f) Finally, compute the growth rate of Yt (GDP) between 2020 and 2021 as a percentage. Round your answer to the nearest tenth of a percent.

Reference no: EM133084196

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