4. An economy has the Cobb-Douglas Production Function: Y = 10K¹/2 L¹/2 It has a savings rate of .20, a depreciation rate of .02, and population growth rate of 0. a. Find the per-capita production function b. Find the steady state level of output and steady state consumption. Verify that you have indeed found a steady state by showing that per-capita saving equals per-capita depreciation at the steady state value of k you found. c. Find the value of the MPK in this equilibriumd Find the MPL d. Suppose this economy has 10 units of Labor. How much Capital does it have in the equilibrium you have identified? e. Verify that labor and capital each have income shares of ½ in this economy. F. Find what would happen to steady state capital, output and consumption if the savings rate were increased to .30. Would you recommend policies that would increase the savings rate

4. An economy has the Cobb-Douglas Production Function: Y = 10K¹/2 L¹/2 It has a savings rate of .20, a depreciation rate of .02, and population growth rate of 0. a. Find the per-capita production function b. Find the steady state level of output and steady state consumption. Verify that you have indeed found a steady state by showing that per-capita saving equals per-capita depreciation at the steady state value of k you found. c. Find the value of the MPK in this equilibriumd Find the MPL d. Suppose this economy has 10 units of Labor. How much Capital does it have in the equilibrium you have identified? e. Verify that labor and capital each have income shares of ½ in this economy. F. Find what would happen to steady state capital, output and consumption if the savings rate were increased to .30. Would you recommend policies that would increase the savings rate

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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