1. Assume that a country's production function is Y = AK0.2L0.8. Population grows at 4 percent...

1. Assume that a country's production function is Y = AK^0.2L^0.8. Population grows at 4 percent and capital depreciates at 2 percent per year. Technology grows at 1 percent a year. Capital is paid its marginal product. A=100 and savings is 20%.

a) What is the steady-state level of capital per effective worker?

b) At the steady-state what is the marginal product of capital?

c) At the steady-state what are the income per effective worker, consumption per effective worker, and investment per effective worker?

Expert Solution

Rahul Sunny answered 3 months ago

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