1) Use the following information for question 11 using a Solow model with population growth. =...
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1) Use the following information for question 11 using a Solow model with population growth. = Two economies, Tatooine and Naboo, share the same aggregate production function of Y = F (K,L) K1/2 L1/2. Tatooine has a depreciation rate of 7% and a population growth rate of 1%, while Naboo has a depreciation rate of 4% and a population growth rate of 4%. Both share a savings rate of 40%. a) (1 point) What is the per worker production function for Tatooine and Naboo? b) (5 points) In year 1, Tatooine has an initial capital stock of 16 and Naboo has an initial capital stock of 36. How will each economy see their capital stock change from year 1 to year 2 and by how much? c) (2 points) Will Tatooine or Naboo have a higher level of income per worker in year 2? (You don't need to find the exact amount of income for each economy) d) (4 points) What is the steady state level of capital for Tatooine? What is it for Naboo? e) (4 points) Plot each economy's path to the steady state. (Be sure to include their initial level of capital, their steady state level, the path over time, and labels for the curves and axis) 1) Use the following information for question 11 using a Solow model with population growth. = Two economies, Tatooine and Naboo, share the same aggregate production function of Y = F (K,L) K1/2 L1/2. Tatooine has a depreciation rate of 7% and a population growth rate of 1%, while Naboo has a depreciation rate of 4% and a population growth rate of 4%. Both share a savings rate of 40%. a) (1 point) What is the per worker production function for Tatooine and Naboo? b) (5 points) In year 1, Tatooine has an initial capital stock of 16 and Naboo has an initial capital stock of 36. How will each economy see their capital stock change from year 1 to year 2 and by how much? c) (2 points) Will Tatooine or Naboo have a higher level of income per worker in year 2? (You don't need to find the exact amount of income for each economy) d) (4 points) What is the steady state level of capital for Tatooine? What is it for Naboo? e) (4 points) Plot each economy's path to the steady state. (Be sure to include their initial level of capital, their steady state level, the path over time, and labels for the curves and axis)
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