ECON3334

FALL 2015

Homework 3

Due at the beginning of class on October 12.

1. Assume the initial capital stock is K0 = 8, the labor supply is fixed at 16, the saving

rate is 0.3, the depreciation rate is 0.1 and production function is in the form of CobbDouglas,

Y=K1/3L2/3.

a. Find the capital, output, consumption and investment levels for 3 periods. In

order words, solve for K1, K2, K3, Y0, Y1, Y2, C0, C1, C2, I0, I1 and I2.

b. Find the steady state values of capital, output, consumption and investment.

2. Discuss and illustrate graphically how a decrease in saving rate will affect the steady

state level of capital and output. Also illustrate graphically the transition of capital

and output from their old steady state level to new one.

3. Consider the Romer model. If the percentage of the population engaged in ideas

formation ( ) decreases, what are the short- and long-term impacts of this shift on Y?

4. Consider the following Romer model of economic growth:

a. and , what is the growth rate

of knowledge in this economy?

b. Using the information from year 1, what is the level of per capita output in

this economy in year 5?

5. Consider the following growth accounting data. The numbers on the table represent

growth rates for a specific variable over a specific time period.

Growth (%) 1948–2011 1948–1973 1973–1995 1995–2007 2007–2011

K/L 0.9 0.9 0.7 1.1 1.1

L 0.2 0.2 0.3 0.2 0.4

TFP 1.4 2.2 0.5 1.5 0.4

If the production function is given by , find the growth rate of

# interned microeconomics

Unlike most other websites we deliver what we promise;

- Our Support Staff are online 24/7
- Our Writers are available 24/7
- Most Urgent order is delivered with 6 Hrs
- 100% Original Assignment Plagiarism report can be sent to you upon request.

**GET 15 % DISCOUNT TODAY **use the discount code * PAPER15* at the order form.