ECN 5021: Advanced Macroeconomics Theory I Test 1 Duration: 1hour 30 minutes Section A 1. Consider the re-modification o

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Ecn 5021 Advanced Macroeconomics Theory I Test 1 Duration 1hour 30 Minutes Section A 1 Consider The Re Modification O 1 (65.25 KiB) Viewed 56 times

ECN 5021: Advanced Macroeconomics Theory I Test 1 Duration: 1hour 30 minutes Section A 1. Consider the re-modification of the Solow growth model from labour-augmenting to capital-augmenting, so that a balanced growth path exists, assume that the production function is Cobb-Douglas: Y(t) = [A(t)K(t)]aL(t)¹-a. Assume that A grows at rate u: A(t) = μA (t). Show that the economy converges to a balanced growth path, and find the growth rate of K on the balanced growth path. [10 marks]