Note: Hand written solution is not allowed. A closed economy has a constant return to scale production technology as follows: Y =zF(K, N), where Y is the aggregate output of consumption goods, z is the total factor produc-tivity, K denotes aggregate capital stocks, and N is the labor size. The capital stock accumulationfunction is:K' = (1-6)K+Iwhere K' represents the aggregate capital stock of tomorrow, K denotes the aggregate capitalstock of today, 8 is the depreciation rate of capital, and I is today's aggregate investment. Therate of growth in the population equals to n which is a constant over time. Consumers consume aconstant fraction of their income. i.e. C = (1 - s)Y, where s is the saving rate, Y > 0, and C isthe aggregate consumption, with 0 < s < 1.(a) Derive the state-steady capital/labor ratio equation for this economy.,(b) Graphically or mathematically, but not both, determines the optimal saving rate for this econ-omy.(c) Assume there are two identical countries in the world, but they differ on the capital level.Let's denote the high capital country as the rich country and the other country as the poorcountry. Show why the poor country should grow faster than the rich one in this model?

Aggregate output refers to the total sum value of all goods and services produced domestically over…

(a) Derive the state-steady capital/labor ratio equation for this economy.. (b) Graphically or mathematically, but not both, determines the optimal saving rate for this econ- omy. (c) Assume there are two identical countries in the world, but they differ on the capital level. Let's denote the high capital country as the rich country and the other country as the poor country. Show why the poor country should grow faster than the rich one in this model?

(a) Derive the state-steady capital/labor ratio equation for this economy.. (b) Graphically or mathematically, but not both, determines the optimal saving rate for this econ- omy. (c) Assume there are two identical countries in the world, but they differ on the capital level. Let's denote the high capital country as the rich country and the other country as the poor country. Show why the poor country should grow faster than the rich one in this model?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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