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4 Now assume that the saving rate decreases to s = 0.15. Calculate the steady-state output per
worker, capital per worker, and consumption per worker.
5 Explain what happens to the level of output per worker and the growth of output per worker
when the saving rate decreases from s0 = 0.2 to s1 = 0.15.
6 Use any spreadsheet software to compute steady-state output per worker and steady-state
consumption per worker for s = 0.2, s = 0.195, s = 0.19, s = 0.185, . . . , s = 0.15. Explain
the intuition behind your results. Show the transition from s0 to s1 graphically. [Hint: graph
the steady-state level of output per worker and the steady-state level of consumption per worker
as a function of the saving rate (i.e., measure the saving rate on the horizontal axis of your
graph and the corresponding values of output per worker and consumption per worker on the
vertical axis).]
7 Calculate the savings rate that would maximize consumption per worker.
8 At s = 0.15, is this economy below or above its Golden Rule steady state?
. 1: Average Annual Rates of Growth of Output per Worker and Technological Progress in Four
Rich Countries since 1985
This table is the same as the one presented in lecture (see lecture notes #5).