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Consider the following production function: Y = AK + BKL1- -CX Assume that the law of motion for capital is Kt+1 = sY4 + K-8K4

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Consider the following production function: Y = AK + BK"L1- -CX Assume that the law of motion for capital is Kt+1 = sY4 + K-8K4 (a) Use Excel to produce a graph of output over time for 200 years, assuming s = 0.2, A = B = 1, 8 = 0.05, L = 1, a = 0.3 and a capital stock at date t = 0 equal to 1. (b) Does growth get exhausted as in the basic Solow model? (c) Compute the marginal product of capital m(K). (d) How does m(K) behave as K +00? (e) Does this production function satisfy the Inada conditions? (f) Explain why sustained growth is possible in this model. (g) Assuming factors are paid their marginal product, compute the income share of labor, 8L(K). (h) How does sl(K) behave as K +00? (i) Does the long-term behavior of the model square with what the data say about the distribution of national income between labor and capital? Consider the following production function: Y = AK + BK"L1- -CX Assume that the law of motion for capital is Kt+1 = sY4 + K-8K4 (a) Use Excel to produce a graph of output over time for 200 years, assuming s = 0.2, A = B = 1, 8 = 0.05, L = 1, a = 0.3 and a capital stock at date t = 0 equal to 1. (b) Does growth get exhausted as in the basic Solow model? (c) Compute the marginal product of capital m(K). (d) How does m(K) behave as K +00? (e) Does this production function satisfy the Inada conditions? (f) Explain why sustained growth is possible in this model. (g) Assuming factors are paid their marginal product, compute the income share of labor, 8L(K). (h) How does sl(K) behave as K +00? (i) Does the long-term behavior of the model square with what the data say about the distribution of national income between labor and capital

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