Question
[Solow Model] Consider a closed economy with competitive markets. The production function satisfies constant returns to scale and diminishing marginal returns to both labor and
[Solow Model] Consider a closed economy with competitive markets. The production function satisfies constant returns to scale and diminishing marginal returns to both labor and capital. The share of capital income in total income stays constant over time. Assume that the economy is in its steady state. If capital per worker K/L grows at a rate 3% per year and (aggregate) capital K grows at a rate 5% per year, find
(a) the GROWTH RATE of consumption per worker C/L.
(b) the GROWTH RATE of (aggregate) investment I.
(c) the GROWTH RATE of labor income wL.
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