Question

A Solow Growth Model economy has a savings rate of 20 percent, a 5 percent rate of depreciation and a production function Y = K^1/2L^1/2. The economy currently has 100 workers and 100 units of capital. How much capital will the economy have one year from now?

Answer 1

$$Y=\sqrt K\sqrt L$$

$$Y=100$$

After 1 year:

$$100\times1.05\times0.8=84$$