Microeconomics and Money Essay

1556 WordsFeb 24, 20157 Pages
Macroeconomics and Money FN2040 Selam Grmay Contents Page • Questions: 1- Outline the concept of the Golden Rule value per worker 2- (i) Produce a table and chart of the steady state value of capital per worker (ii) Produce a table and chart that indicates the value of (k*GOLD ) • Referencing 1: Outline the concept of the golden rule value of capital per worker (k*GOLD ) N. Gergory Mankwi commonly defined the golden rule as the ‘the question, to sacrifice this generation for the gains and interest of the future generations? Today many economists argue the pros and cons of an open economy verses a mixed or closed one. The golden rule is a tool that has been created by economist to balances the nature of man; to be happy, with the needs of the economy. This is somewhat counter constructive to the very foundation to which the golden rule is built on, Robert Solow growth model of the steady state, as in essences the Solow model could be used to argue that higher saving, which equals more income, is all that relevant. The golden rule demonstrates that not only is it not feasible, as we would all stave, but undesirable. The Solow growth model, to which the golden rule is built on, looks to locate the optimum level (steady state) in which investment in new capital is equal to the loss in capital. ∆k= sf(k) − (δ+n)k =0 → sf(k∗) = (δ + n)k∗ If there is no productive growth then, the output per worker, consumption per worker and capital per worker is at an constant. Equaling a steady state. We calculate the steady state through assuming first and foremost there is no population growth thus: Y= F(K,L) Y= F ( K , L ) y= f(k) L L L The slop of this

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