Macro Module 4 Solow growth model real savings practice exam questions


Macro Module 4 Solow growth model real savings practice exam questions...

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Macro Module 4 Solow growth model real savings practice exam questions

(The attached PDF file has better formatting.)

Question 4.1: Real savings

An economy that follows a simple Solow growth model has

●    real savings = 84
●    depreciation rate = 5.58%
●    real GDP = 640
●    capital = 6,470

What is the savings rate in this economy?

Answer 4.1: 84 / (640 – 6,470 × 5.58%) = 30.11%

real savings = savings rate × net income = savings rate × (gross income – depreciation rate × capital) ➾

savings rate = real savings / (gross income – depreciation rate × capital)

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