Suppose that a particular economy has the following characteristics: s = 0.15 n

Question

Suppose that a particular economy has the following characteristics:
s = 0.15 n = 0.02 g = 0.01 d = 0.02
K = 9000 Y = 3000 where s is the savings rate, n is the population growth rate, g is the growth rate of technology, d
is the rate of capital depreciation, K is the real value of the capital stock, and Y is real output.
Note: When the balanced growth model is amended to allow for depreciation, the balanced growth condition becomes: sY = (n + g + d)?.
(a) Use the Solow model to determine whether this economy is on a balanced growth path. Be sure to explain what it means for an economy to be on a balanced growth path.

Explanation / Answer

sY = (n + g + d)K

sY = 0.15*3000 = 450

(n+g+d)K = 0.05*9000= 450

this economy is on a balanced growth path

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.