Question

Consider a Solow growth model with the formulation

=0.0175 investment=0.192K‾‾√Y=0.384K‾‾√,δ=0.0175 investment=0.192⁢KY=0.384⁢K,
Whereδis the rate of depreciation,KKis level of capital, and Y is the level of output.
Adjust the line labeled Depreciation and the function labeled Investment to be consistent with the given model.

Answer 1

In a Solow growth model, the equations for investment and depreciation were provided inconsistently. The correct equations should be I = βK√(Y) for investment and δ = βK for depreciation.

Step-by-step explanation:

The provided Solow growth model has equations for investment and depreciation inconsistently represented. The correct equations for investment and depreciation should be:

Investment: I = βK√(Y)

Depreciation: δ = βK

Where β is the investment rate, K is the level of capital, and Y is the level of output.