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6. Consider a hypothetical economy that has the production function Y = F (K, LE) = K¹/³ (LE) 2/3, where Y is output, K is capital, and LE is the number of effective workers. Suppose the saving rate is 20%, the capital depreciates by 3%, the population grows at the rate of 1%, and the rate of labor-augmenting technological change is 1%. a. Solve for the per-effective-worker production function. b. At what rate (%) do the following grow in the steady state? i. Total output ii. Output per worker iii. Output per effective worker iv. Real rental price V. Real wage c. Find the steady-state level of capital per effective worker, output per effective worker, and consumption per effective worker. / า d. Is the steady-state level of capital per effective worker at the golden rule less than, greater than, or equal to your answer in (c)? How much should the saving rate (%) be to achieve the golden rule level of capital? Is the level of consumption per effective worker at the golden rule less than, greater than, or equal to your answer in (c)?'

6. Consider a hypothetical economy that has the production function Y = F (K, LE) = K¹/³ (LE) 2/3, where Y is output, K is capital, and LE is the number of effective workers. Suppose the saving rate is 20%, the capital depreciates by 3%, the population grows at the rate of 1%, and the rate of labor-augmenting technological change is 1%. a. Solve for the per-effective-worker production function. b. At what rate (%) do the following grow in the steady state? i. Total output ii. Output per worker iii. Output per effective worker iv. Real rental price V. Real wage c. Find the steady-state level of capital per effective worker, output per effective worker, and consumption per effective worker. / า d. Is the steady-state level of capital per effective worker at the golden rule less than, greater than, or equal to your answer in (c)? How much should the saving rate (%) be to achieve the golden rule level of capital? Is the level of consumption per effective worker at the golden rule less than, greater than, or equal to your answer in (c)?'

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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e. Suppose the benevolent policymaker sets the saving rate at the golden rule level of capital as stated in (d). Draw a graph that shows the change in the steady-state level of capital per effective worker from (c) to (d)
Transcribed Image Text:e. Suppose the benevolent policymaker sets the saving rate at the golden rule level of capital as stated in (d). Draw a graph that shows the change in the steady-state level of capital per effective worker from (c) to (d)
6. Consider a hypothetical economy that has the production function Y = F(K, LE) = K¹/3 (LE)2/3, where Y is output, K is capital, and LE is the number of effective workers. Suppose the saving rate is 20%, the capital depreciates by 3%, the population grows at the rate of 1%, and the rate of labor-augmenting technological change is 1%. a. Solve for the per-effective-worker production function. b. At what rate (%) do the following grow in the steady state? i. Total output ii. Output per worker iii. Output per effective worker iv. Real rental price V. Real wage c. Find the steady-state level of capital per effective worker, output per effective worker, and consumption per effective worker. / 7 d. Is the steady-state level of capital per effective worker at the golden rule less than, greater than, or equal to your answer in (c)? How much should the saving rate (%) be to achieve the golden rule level of capital? Is the level of consumption per effective worker at the golden rule less than, greater than, or equal to your answer in (c)?'
Transcribed Image Text:6. Consider a hypothetical economy that has the production function Y = F(K, LE) = K¹/3 (LE)2/3, where Y is output, K is capital, and LE is the number of effective workers. Suppose the saving rate is 20%, the capital depreciates by 3%, the population grows at the rate of 1%, and the rate of labor-augmenting technological change is 1%. a. Solve for the per-effective-worker production function. b. At what rate (%) do the following grow in the steady state? i. Total output ii. Output per worker iii. Output per effective worker iv. Real rental price V. Real wage c. Find the steady-state level of capital per effective worker, output per effective worker, and consumption per effective worker. / 7 d. Is the steady-state level of capital per effective worker at the golden rule less than, greater than, or equal to your answer in (c)? How much should the saving rate (%) be to achieve the golden rule level of capital? Is the level of consumption per effective worker at the golden rule less than, greater than, or equal to your answer in (c)?'
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