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  Consider an economy described by the following CobbDouglas, constant-returns-to-scale,aggregate production function: Y (K, L) = ^

Business Sep 17, 2020

 

Consider an economy described by the following CobbDouglas, constant-returns-to-scale,aggregate production function:
Y (K, L) = ^. ^.
i.) Derive the per-capita/worker production function
ii.) Assume the depreciation rate (?) is 1.5 percent, the population growth (n) is 4 percent, and the savings rate (s) is 8 percent; derive the discrete fundamental Solow Growth equation, and finally find the steady-state capital stock per-capita/worker (k*) and output per-capita/worker (y*).
iii.) Assume the savings rate (s) rises to 16 percent, all else equal, recalculate steady-state per-capita/worker stock and output percapita/worker. Then explain the positive implications of an increase in the savings rate on the economy in the long-run

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