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Country A and country B both have the production function Y = L'4K'5 (a) Does this production function have constant returns to scale? Explain referring
Country A and country B both have the production function Y = L'4K'5 (a) Does this production function have constant returns to scale? Explain referring back to the equation (e.g' multiply the inputs by a factor 2) (b) Write down the equation in a per-worker basis. Does output per worker depends on capital per worker? Explain. (c) Assume that neither country experiences population growth or technological progress, and that 5 percent of capital depreciates each year. Further, assume that country A saves 15 percent of output each year and country B saves 20 percent of output each year. Find the following for each country. i)the steadystate level of capital per worker for each country. ii) the steady-state levels of income per worker (d) Suppose that country A begins to invest 20 percent of its output every year. Which of the two countries will have greater growth following country's A increase in investment? Please explain your answer without a diagram
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