# Excel Problem. Suppose that you have a standard Solow model with a Cobb-Douglas production function.

Excel Problem. Suppose that you have a standard Solow model with a Cobb-Douglas production function. The central equation of the model can be written: (a) Analytically solve for an expression for the steady state capital stock per worker. (b) Suppose that A = 1 and is fixed across time. Suppose that s = 0.1 and _ = 0.10. Suppose that _ = 1/3. Create an Excel file. Using your answer from the previous part, numerically solve for k _ using these parameter values. (c) Create a column in your Excel sheet corresponding to periods. Let these periods run from period 1 to period 100
»  Excel Problem. Suppose that you have a standard Solow model with a Cobb-Douglas production function. The central equation of the model can be written: (a) Analytically solve for an expression for the steady state capital stock per worker. (b) Suppose that A = 1 and is fixed across time. Suppose that s = 0.1 and _ = 0.10. Suppose that _ = 1/3. Create an Excel file. Using your answer from the previous part, numerically solve for k _ using these parameter values. (c) Create a column in your Excel sheet corresponding to periods. Let these periods run from period 1 to period 100. Suppose that the capital stock per worker equals its steady state in period 1. Use the central equation of the Solow model to compute the capital stock in period 2, given this capital stock in period 1. Then iterate again, computing the capital stock in period 3. Continue on up until period 9. What is true about the capital stock in periods 1 through 9 when the capital stock starts in the steady state in period 1? (d) Suppose that in period 10 the saving rate increases to 0.2 and is expected to forever remain there. What will happen to the capital stock in period 10? (e) Compute the capital stock in period 11, given the capital stock in period 10 and the new, higher saving rate. Then iterate, going to period 11, and then period 12. Fill your formula down all the way to period 100. Produce a plot of the capital stock from periods 1 to 100. (f) About how many periods does it take the capital stock to get halfway to its new, higher steady state value when s increases from 0.1 to 0.2?

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