Solow

Question 1

assumptions of solow (5)

Answer 1

The key assumptions are:
* constant returns to scale production function;
* diminishing returns to each factor of production;
* the savings and depreciation rates are exogenous;
* a closed economy;5
* total factor productivity is exogenous.

Question 2

Solow story for during and after war

Answer 2

The Solow story would be the following: during World War II, a lot of physical capital was destroyed (as were other resources). As the capital stock fell, the marginal product of capital rose. With constant depreciation, this implies high economic growth rates; this is shown as growth rates accelerated from 1950 to about 1980; however, as these countries continued to accumulate capital, the MPK began to fall relative to the depreciation rate

Question 3

what is K

Answer 3

(sA/d)^1-1-alpha

Question 4

what is y

Answer 4

a(k*)^alpha