Assume that a country's production function is Y = K/2*L/2 and there is no population growth or technological change. a. What is the per-worker production function y = f (k)? b. Assume that the country possesses 40,000 units of capital and 10,000 units of labor. What is Y? What is labor productivity computed from the per-worker production function? Is this value the same as labor productivity computed from the original production function? c. Assume that 10 percent of capital depreciates each year. What gross saving rate is necessary to make the given capital-labor ratio the steady-state capital–labor ratio? (Hint: In a steady state with no population growth or technological change, the saving rate multiplied by per-worker output must equal the depreciation rate multiplied by the capital- labor ratio.) d. If the saving rate equals the steady-state level, what is consumption per worker?

Assume that a country's production function is Y = K/2*L/2 and there is no population growth or technological change. a. What is the per-worker production function y = f (k)? b. Assume that the country possesses 40,000 units of capital and 10,000 units of labor. What is Y? What is labor productivity computed from the per-worker production function? Is this value the same as labor productivity computed from the original production function? c. Assume that 10 percent of capital depreciates each year. What gross saving rate is necessary to make the given capital-labor ratio the steady-state capital–labor ratio? (Hint: In a steady state with no population growth or technological change, the saving rate multiplied by per-worker output must equal the depreciation rate multiplied by the capital- labor ratio.) d. If the saving rate equals the steady-state level, what is consumption per worker?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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