Question
An economy has a Cobb-Douglas production function: The economy has a capital share of 10%, a saving rate of 20 percent, a depreciation rate of
An economy has a Cobb-Douglas production function: The economy has a capital share of 10%, a saving rate of 20 percent, a depreciation rate of 7 percent, a rate of population growth of 2 percent, and a rate if labor-augmenting technological change of 1 percent. It is in steady state. a. At what rates do total output, output per worker, and output per effective worker grow? b. solve for capital per effective worker, output per effective worker, and marginal product of capital. c. does the economy have more or less capital than the golden rule steady state? why?
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