Solow Growth Model a. Assume the production function is y = f(k) = 5 ∗ √?....

Solow Growth Model

a. Assume the production function is y = f(k) = 5 ∗ √?. That is for a given level of the capital-labor ratio, k, output, y, is five times the square-root of k. Assume n, the rate of population growth, is 0.02 and d, the rate of depreciation is 0.03. Assume the savings rate, s, is 0.10. Calculate the steady state levels of output, y*, and the capital-labor ratio, k* for the Solow Growth Model with no technological progress.

b. Assume the savings rate doubles to s= 0.2, but everything else from part a is the same. Find the new k* and y*.

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Rahul Sunny answered 1 year ago

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