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Consider the following numerical example using the Solow growth model. Suppose that F (K, N) = zK1/2N1/2 Furthermore, assume that 5% of the capital is
Consider the following numerical example using the Solow growth model. Suppose that F (K, N) = zK1/2N1/2 Furthermore, assume that 5% of the capital is lost each period due to depreciation, the population grows by 1% each period, the consumer in this economy saves 20% of his income and the total factor productivity is z = 2. The unit period is one year. 1. Find the steady state per-capita quantity of capital (k*), production (y*) and consumption (c*). 2. Find the steady state quantity of capital per worker that maximize consumption per worker in this model. 3. Derive the golden rule steady state per-capita consumption (c**), production (y**) and saving (s**)
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