Answer to Question #80299 in Macroeconomics for craig smith

Question

4. Consider the following production function:

Y = K.5(AN).5,

where both the population and the pool of labor are growing at a rate n = .07, the capital stock is depreciating at a rate d = .03, and A is normalized to 1.

a. What are capital’s and labor’s shares of income?
b. What is the form of this production function?
c. Find the steady-state values of k and y when s = .20.
d. At what rate is per capita output growing at the steady state? At what rate is total output growing? What if total factor productivity is increasing at a rate of 2 percent per year (g = .02)?

Answer 1

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