Econ: Economics and Steady State

You may work with your colleagues, but you must submit your own assignment to receive credit. The assignment is due at the beginning of the class on the due date for the assignment. Late assignments must be submitted to your TA within 24 hours of the due date/time to be eligible for half credit. You may make arrangements with your TA to submit your assignment early if necessary.

The Slow model and the steady-state. Under the assumption of constant labor supply and constant TFTP, the Slow model is formulated as:

c AK a L I-a (1 -s)Y 1+(1 -6)K where K > O is given.

• (a) Rewrite the model in terms of per worker quantities. As usual, use lowercase letters to denote variables that are in per worker terms.
• (b) Suppose that 6 = 0. 06, s = 0. 15, a = 0. 35, and A = 100. If k = 2,000, then find y, c, I, and k.
• (c) Construct the Slow diagram that illustrates y, c, I, k, and k from your previous answer.
• (d) Derive an algebraic expression tort the steady-state levels to capital per worker k ND output per worker.