Country economy growing

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1. According the Solow model, when is a country's economy growing?

2. In the notes we assumed that the coefficient on the Cobb-Douglas production function had a value of 1. But, for the sake of this question, assume it increases from 1 to a value of 1.5. Describe what would  happen in our graph. Comment on the steady state values of capital, production, and income.

3. Consider two countries that have the same values of α of 1/3 and the same value of δ. Country A has a value of γ of .40 and Country B has a value of γ of .10. Country A has per worker income twice that of Country B - true or false? Explain your answer.

4. Say that the government of a country uses the Solow model to understand how to increase per worker income. Which parameter is easiest to change to increase per worker income? Why?

5. What is the impact of δ on the steady-state solution of the Solow model? Why is this?

Reference no: EM133128971

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