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Consider the economy of Avataria, which can be described by the Solow model. Avataria has the depreciation rates of 7% and the production function Y(K,L)
Consider the economy of Avataria, which can be described by the Solow model. Avataria has the depreciation rates of 7% and the production function Y(K,L) = 8(K)\"'(L)3\". (a) Assume that Avataria has the investment rate of 11% and the population growth of 4%. Calculate the steady-state capital-labor ratio, output per worker, and consumption per worker. Also, what is the growth rate of the total (aggregate) output in Avataria in the steady state? (b) Now assume that Avataria has the population growth, which increased its steady state output per worker by 10%. Calculate the new rate of the population growth. Also, what is the growth rate of the total (aggregate) output in Avataria in the steady state in this case
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