Macro Module 4 Solow growth model growth rate of capital practice exam questions


Macro Module 4 Solow growth model growth rate of capital practice exam...

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Macro Module 4 Solow growth model growth rate of capital practice exam questions

(The attached PDF file has better formatting.)

Question 4.1: Growth rate of capital per worker

An economy follows a Solow growth model with no technological progress. In 20XX (not the steady state)

s = savings rate = 25.63%
y = income per worker = 224 units per worker per annum
k = capital per worker = 830 units per worker
n = population growth rate = 1.62% per annum
δ = annual depreciation rate of capital = 4.60%

What is the annual growth rate of capital per worker for 20XX?

Answer 4.1: 25.63% × (224 / 830 – 4.60%) – 1.62% = 4.12%

annual growth rate of capital per worker = savings rate × (ratio to income per worker to capital per worker – annual depreciation rate of capital) – population growth rate

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