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Consider an economy where output is growing at a rate of 6% , the saving rate is 12% , the depreciation rate is 1% and the population does not grow. If the capital output ratio is 3/2 , is the economy consistent with the Harrod-Domar model, if not , then what should be the growth rate of output so that the economy is consistent with the model? If the population growth rate is 1% then is the ecomomy cosistent?
Suppose that the above economy is characterized by solow model with the production fuction Y = K^1/3L^2/3. Find the long run capital labor ratio for both cases in the economy. What should be the saving rate (in both cases) so that the economy is in the golden rule steady state?
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