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2. Country A described by the Solow-Swan model has the following production function: Y K 0.25 i=(f) where Y is aggregate output, K is capital

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2. Country A described by the Solow-Swan model has the following production function: Y K 0.25 i=(f) where Y is aggregate output, K is capital and L is labour. Also, assume the population growth on = 2% and depreciation d = 3%. (a) Solve for country A's saving rate 9,; and steady-state capital labour ratio K/L* if steady- state output per worker is YfL'\" = 2. (3 points) Assume country B is characterised by the same population growth rate and depreciation as country A, but has the production function: Y K 025 E: (I) (b) Compute the saving rate 33 that country B needs in order to achieve the same standard of living as country A with a steady-state output per worker of Y/L* = 2. (2 points) (c) How does the saving rate in country B compare to that of country A? Explain the economic intuition for your answer. (2 points) 3. In 2020, the economy of Macroland exported $400 billion of goods and $300 billion of services while it imported $500 billion of goods and $350 billion of services. Furthermore, the rest of the world purchased $250 billion of Macroland's assets. (a) Compute Macroland's balance of payment on the current account and the capital account in 2020. (2 points) (b) What was the value of Macroland's purchases of assets from the rest of the World in 2020'? (2 points)

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