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Assume that a country's production function is Y = AK power 0.3 L power 0.7 (and MPK = 0.3 Y/K ) The ratio of capital
Assume that a country's production function is Y = AK power 0.3 L power 0.7 (and MPK = 0.3 Y/K ) The ratio of capital to output is 3, the growth rate of output is 3 percent, and the depreciation rate is 4 percent. Assume the economy is in a steady state.
21.Write down the steady state condition and calculate the saving rate for this
steady state.
22.Write down the Golden Rule for this economy. Is this economy in the Golden
Rule steady state?
23.What saving rate would be required to reach the Golden Rule steady state?
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