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

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

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

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

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ANSWER COMPLETE SOLUTION OKAY?
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