Question
Consider two countries: F and P. In both countries the production function is Cobb- Douglas: Y = zK1/3 N2/3. The population growth rate is 0.1,
Consider two countries: F and P. In both countries the production function is Cobb- Douglas: Y = zK1/3 N2/3. The population growth rate is 0.1, physical capital depreciates at the rate of 0.1, and z = 1. In F the savings rate is sF = 0.2 and in P it is sP = 0.4. a) Write the production function in terms of output per worker (Y/N). (5 marks) b) Find the steady-state values of the capital-labor ratio (K/N) in both countries. (5 marks) c) Find the steady-state values of output per worker (Y/N) in both countries. (5 marks) d) In which country is consumption per worker higher in the steady-state? (5 marks) e) In which country is the marginal product of labour higher in the steady-state?
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