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Consider the production function for a closed economy: Y = 4K0.5 (AN) 0.5 - = where Y is aggregate output, A is technology, K is capital stock and N is labou Capital evolves according to Kt+1 = sYt + (1 − 8)Kt. Also, assume so 0. labour force growth 9N = 2%, technology growth gA = 3%, and depreciation 8 = 3%.

Consider the production function for a closed economy: Y = 4K0.5 (AN) 0.5 - = where Y is aggregate output, A is technology, K is capital stock and N is labou Capital evolves according to Kt+1 = sYt + (1 − 8)Kt. Also, assume so 0. labour force growth 9N = 2%, technology growth gA = 3%, and depreciation 8 = 3%.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Assume the economy is initially in its balanced growth state. Suppose policymakers pursue policies that would increase the saving rate to s1=0.3. Draw a carefully-labelled diagram to illustrate the effect of the change in the saving rate on the economy in the long run. Explain the effect of the change in saving rate on steady-state capital per effective worker and steady-state consumption per effective worker?
Consider the production function for a closed economy: Y = 4K0.5 (AN) 0.5 where Y is aggregate output, A is technology, K is capital stock and N is labour. Capital evolves according to Kt+1 = sYt + (1 − 8)Kt. Also, assume so = 0.2, 2%, technology growth gA = 3%, and depreciation labour force growth gn 8 = 3%. =
Transcribed Image Text:Consider the production function for a closed economy: Y = 4K0.5 (AN) 0.5 where Y is aggregate output, A is technology, K is capital stock and N is labour. Capital evolves according to Kt+1 = sYt + (1 − 8)Kt. Also, assume so = 0.2, 2%, technology growth gA = 3%, and depreciation labour force growth gn 8 = 3%. =
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