problem code : 16609MACRO

[vishruti]

In the country of Tropica, output is growing at a rate of 5 percent per annum: delta Y/Y
 =0.05. Also, the savings rate in this country is s = 0.10, and the depreciation rate =0.05. What should be the capital output ratio so that the economy is consistent with the Harrod- domar growth model?

Consider the situation above with a Solow model. Let the production function be y = k^0.5 where y= Y/L output per worker, k =K/L capital per worker. In the steady state what capital-labor ratio (k) would you expect to observe in the country? Assume delta L/L = 0.04

Suppose another economy which is characterized by the production function y = A(k)^ ½  , where y =Y/L is output per worker, k = K/L is capital per worker, and A is a productivity index. Given that the rate of growth of output per worker deltay/y = 0.02 and the rate of growth of capital per worker delta k/k = 0.02. What is the rate of growth in productivity?

(source : prof. Tybout)

[Smriti]

capital output ratio=1
K/L ratio=1.234 (k^.5=10/9)
the last part i am not sure about

[vishruti]

capital output ratio is 2

second answer is correct

third answer is 0.01

[Smriti]

for the capital output ratio(q), isnt the equation: q(1+g)=q(1-d)+s
where, g=0.05 d=0.05 and s=0.10?
and how to solve the last part? thankyou

[vishruti]

sorry the capital output ration is 1 not 2 . the answer is correct

for the third part we use the equation delta A/A= delta y / y - a. delta k / k , where y is Y/L and k is K/L  and a is the elasticity of output wrt capital

substituting the values in the above equation gives delta A /A = 0.01

[sakshi]

plz tell how u did q2..???