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Country A and country B both have the production functions: Y = F (K, L)=K0.5L0.5 = a. Express the production function in per worker
Country A and country B both have the production functions: Y = F (K, L)=K0.5L0.5 = a. Express the production function in per worker terms. Thus, find y = f (k) where y= Y/L and k=K/L b. Suppose that both countries start off with a capital stock per worker of 2 (i.e. k = 2). Determine the level of income/output per worker and consumption per worker and illustrate them on a graph c. There is no population growth or technological progress. Assume that the savings rate in country A is 10% and its capital stock depreciates at a rate of 5% annually. Country B, on the other hand, has a savings rate of 20% and capital stock depreciation rate of 5%. Using your answer from part (a) and the steady-state condition iii. Find the steady-state level of capital per worker in each country Find the steady-state levels of income (output) per worker and consumption per worker for each country Show on a graph the steady-state capital stock per worker, output per worker and consumption per worker for each country d. State the condition for the Golden Rule and find the Golden Rule level of capital stock.
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a Express the production function in per worker terms Thus find y f k where y YL and kKL The production function in per worker terms can be expressed ...Get Instant Access to Expert-Tailored Solutions
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