Question
Hi can someone please help with the following problem, thank you! 4) Consider an economy described by the production function: Y = F (K, L)
Hi can someone please help with the following problem, thank you!
4) Consider an economy described by the production function:
Y = F (K, L) = K 0.3 L 0.7
a.What is the per worker production function, y=f(k)?
b.Assuming no population growth or technological progress, find the steady state capital stock per worker, output per worker, and consumption per worker as a function of the saving rate and the depreciation rate.
c.Assuming that the depreciation rate is 10 percent per year.Make a table showing steady state k, y and c for savings rates 0 percent, 10 percent, 20 percent, 30 percent and so on (again, Excel can help here!)What is the saving rate that maximizes y?What saving rate maximizes c?
d.Use the given production function to find the marginal product of capital.Add to your table in part (c) a column for MPK net of depreciation for each saving rate.What does your table show about the relationship between the net marginal product of capital and steady-state consumption?
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