Question
(b) Suppose 0 (b) Suppose O < T < Y and Y = zF(K, N) = zk. i. Derive the capital/labor ratio of tomorrow as
(b) Suppose 0
(b) Suppose O < T < Y and Y = zF(K, N) = zk. i. Derive the capital/labor ratio of tomorrow as a function capital/labor ratio of today. ii. Under what circumstances, there will be a steady state. iii. Assume this country is in the steady state before an exogenous shock happens. Now, s, saving rate, permanently increases, graphically and intuitively explain the short run change in k (capital/labor ratio) , i (investment/capital ratio) , c (consump- tion/labor ratio), and long run as well.
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