Question
1. Country A has a capital-labor ratio that is initially twice as big as that of countryB, but neither is yet in a steady state.
1. Country A has a capital-labor ratio that is initially twice as big as that of countryB, but neither is yet in a steady state. Both countries have the same productionfunction, f(k) = 6k0.5. Country A has a 10% saving rate, 10% population growthrate, and 5% depreciation rate, while country B has a 20% saving rate, 10%population growth rate, and 20% depreciation rate.
a) Calculate the steady-state capital-labor ratio for each country. Does the initialcapital-labor ratio affect your results?
(b) Calculate output per worker and consumption per worker for each country.
(c) Which country has the highest output per worker? Explain.
(d) Which country has the highest consumption per worker? Explain.
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