EC7102 Macroeconomics

Assignment on Long-run Economic Growth2023 ver A

Q1.    In the first stage of the Solow model of economic growth, briefly explain what is          meant by a “steady-state”.  Outline the capital accumulation equation in your          answer.

Illustrate an economy at a steady-state.

Mark on your diagram a point where the economy is not at a steady-state, where the amount of capital-per-worker is k > k*.  Briefly explain how an economy moves from this point towards a steady-state.

Q2.      Suppose that the capital stock is €200 billion, the labour force is 2m workers, the             depreciation rate is 10% and the labour force is growing at 2% each year.             Calculate the required breakeven level of investment per worker. Show all             calculations.