Consider the following Cobb-Douglas production function: Y = K" (AN)6 where both the population and the labor force are growing at a rate n = 0.04, the capital stock is depreciating at a rate d = 0.02, and A is normalized to 1. What are capital's and labor's shares of income? Find the steady-state values of per capita capital k, and per capita output y when s = 0.3. At what rate is per capita output growing at the steady state? At what rate is total output growing at the steady state? How these growth rates changes if total factor productivity A grows at a rate of 2% (g= 0.02)?
Consider the following Cobb-Douglas production function: Y = K" (AN)6 where both the population and the labor force are growing at a rate n = 0.04, the capital stock is depreciating at a rate d = 0.02, and A is normalized to 1. What are capital's and labor's shares of income? Find the steady-state values of per capita capital k, and per capita output y when s = 0.3. At what rate is per capita output growing at the steady state? At what rate is total output growing at the steady state? How these growth rates changes if total factor productivity A grows at a rate of 2% (g= 0.02)?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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