Consider the following production function: Yt = F( Kt , Nt ) = ( Kt1/2 +...

Consider the following production function: Y_t = F( K_t , N_t ) = ( K_t^1/2 + N_t^1/2 )² Assume that capital depreciates 5% each year and that households save 5% of their income. Assume that investment is equal to savings. Finally, assume that the population is growing 15% each year.

1. Solve for the steady state level of capital per worker as a function of δ and s.

2. Solve for the steady state level of output per worker as a function of δ and s.

3. What is the steady state growth rate of output per worker?

4. What is the steady state growth rate of output?

Expert Solution

Rahul Sunny answered 2 years ago

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