Answered: 3. Suppose that the production function…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter23: The International Trade And Capital Flows

Section: Chapter Questions

Problem 29RQ: Does a trade surplus help to guarantee strong economic growth?

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3. Suppose that the production function of a country is given by Y=K^aL^1-^a, where 0<a<1, Y is output, L is labour, and K is capital,

Derive the equation for steady state capital per worker, output per worker, and consumption per worker in terms of the saving rate (s) and depreciation rate (d).

3. Suppose that the production function of a country is given by
Y=KaL¹-%, where 0<a<1, Y is output, L is labour, and K is capital,
Page 1 of 2
Derive the equation for steady state capital per worker, output per worker, and
consumption per worker in terms of the saving rate (s) and depreciation rate (8).

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Step 1

Steady state is the state where investment equals depreciation, that is the rate of change of investment is zero.

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