# (SOLVED)Consider a version of Solow's Model

**Discipline:** Economics

**Type of Paper:** Question-Answer

**Academic Level:** Undergrad. (yrs 3-4)

**Paper Format:** APA

**Pages:**1

**Words:**275

Question

Consider a version of Solow's Model: =AKtαLt1−αsYt=Kt+1−Kt+δKtLt=L0(1+n)t 1

a) Rewrite the production function and the equation of capital accummulation using variables normalized by the units of labor, i.e. =K/L;y=Y/L

b) What are the values of and in a steady state? What are the growth rates of aggregate output and aggregate consumption? Consider this different version of Solow's Model:

Yt=AKtα(EtLt)1−αsYt=Kt+1−Kt+δKtLt=L0(1+n)tEt=E0(1+x)t

c) Rewrite the production function and the equation of capital accummulation using variables normalized by the units of effective labor, i.e. =K/(EL);y=Y/(EL).

d) What are the values of and along a balanced growth path? What is the growth rate of aggregate output and aggregate consumption along this BGP?

**EXPERT SOLUTION PREVIEW**

**a) The production function and
equation of capital accumulation in this version of Solow's model can be
rewritten in terms of variables normalized by units of labor as follows:**

Explanation

**Production Function:**

y = Y/L = AK/L^(1-a) = Ak^a, where k = K/L

**Capital Accumulation Equation:**

dk/dt = sAk^a - (d+g)k, where k = K/L

where y denotes output per hour
worked, k denotes capital per hour worked, s denotes savings rate, d denotes
depreciation rate, and g denotes population......