Answer to Question #283729 in Macroeconomics for ABEX

Question

29. Assume that the production function can be given by Y = A of radical KL

where Y = output, L = labor, K = capital and the technology parameter A = 1. Assume further that the saving rate is 25%, labor force grows at a rate of 2%, and the depreciation rate is 5%.

(a) Determine:

i. The steady state level of per capita capital stock.

ii. The steady state level of per capita income.

iii. The steady state level of per capita consumption

(b) Is the steady state level of capital per worker the same as the \golden rule" level of capital?

Answer 1

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