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Consider two countries: Country A and Country B. Each country has the following CobbDouglas type production function: Country A: Y = (K0.5 )(EL)0.5 Country B:
Consider two countries: Country A and Country B. Each country has the following CobbDouglas type production function: Country A: Y = (K0.5 )(EL)0.5 Country B: Y = (K0.7 )(EL)0.3 Unfortunately, your knowledge of Country A is a bit limited. You have pieces of information, but you don't know the entire picture. o Savings rate (s): unknown for Country A and 14.29% for Country B o Steadystate value of capital per effective worker: unknown for both countries, but you have heard that Country A has four times the steady state value of capital per effective worker compared to Country B. o Population growth rate (n): 1% for Country A and 3% for Country B o Technological progress rate (g): 2% for both Country A and Country B o Depreciation rate (): 5% for both Country A and Country B
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