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Question 1: Solow model Suppose that an economy's production function is Y = x/Kx/AN Suppose that the saving rate, s, is equal to 17%, and
Question 1: Solow model Suppose that an economy's production function is Y = x/Kx/AN Suppose that the saving rate, s, is equal to 17%, and that the rate of depreciation(6) is equal to 9%. Suppose further that the number of workers grows at 2% per year and that the rate of technological progress is 2% per year. Using this setup, compute the following: (a) The steadystate value of the capital stock per effective worker (b) The steadystate value of the output per eective worker (c) The steadystate value of the growth rate of output per effective worker (d) The steadystate value of the growth rate of output per worker (e) The steadystate value of the growth rate of output (f) Suppose that the rate of technological progress doubles to 4% per year. Recompute the values for (a)(e)
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