2. A country has the per-worker production function y = 5k05, where ye is output per worker and y, is the capital-labor ratio. The depreciation rate is 0.2 and the population growth rate is 0.05. The saving function is Se=0.4Y, where Se is total national saving and Yis total output. a) Calculate the steady-state value of the capital-labor ratio, output per worker, and consumption per worker. b) Draw a graph to show how the steady state values will change when the population growth rate increases. Show the original and new steady state on the graph. State how the steady state k, y, and c change.

2. A country has the per-worker production function y = 5k05, where ye is output per worker and y, is the capital-labor ratio. The depreciation rate is 0.2 and the population growth rate is 0.05. The saving function is Se=0.4Y, where Se is total national saving and Yis total output. a) Calculate the steady-state value of the capital-labor ratio, output per worker, and consumption per worker. b) Draw a graph to show how the steady state values will change when the population growth rate increases. Show the original and new steady state on the graph. State how the steady state k, y, and c change.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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