Demonstrate how growth accounting could be utilized to learn

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Reference no: EM1344117

Q. 1. Assume which an economy can be modelled with the Solow growth model. The production
technology is
Y (t) = K(t)®L(t)¯;
where Y is o/p, K is the stock of capital also L is effective labor. Also, note which
® + ¯ = 1. Effective labor is
L(t) = A(t)N(t)
with _A = gA also _N = nN.

a) Find the steady state value of k = K=L.

b) Find the growth rate of o/p also consumption. Do they differ from the growth rate of per capita o/p also per capita consumption?

c) Demonstrate how growth accounting could be utilized to learn the value of g.

d) Analyze the effects of an unanticipated permanent reduction in g on the real income rate also the real interest rate.

Reference no: EM1344117

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