Question 1Consider the following economy with production function:Y = AK"L-awhere Y is total output; K is capital; L is labour force; A is the level of technology(exogenous); s is the saving rate; n is the population growth rate; 0 < a < 1. Assumethe rate of capital depreciation (5) to be zero. Hence, capital accumulation equation is:K = sY(a) Does this production function exhibitconstantreturns to scale to capital and labour?Explain. Derive production function per worker.(b) Derive an equation showing how the growth rate of capital per worker depends ons, n, and A. Explain its growth implications and use a graph to support your answer.(c) Find out the expression for the steady state capital per worker andoutputper worker.How do they depend on s, n, and A? Explain.(d) Instead of assuming saving rate (s) to be a constant, suppose we assume that "s"depends on y,y =(equivalently on k, k = . In particular, s = e is constant. Findthe expression for the growth rate of capital per worker. Compare this expression withthe one obtained in part (b). Use graphs to support your answer.

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Question 1 Consider the following economy with production function: Y = AK"LL-a where Y is total output; K is capital; L is labour force; A is the level of technology (exogenous); s is the saving rate; n is the population growth rate; 0

Question 1 Consider the following economy with production function: Y = AK"LL-a where Y is total output; K is capital; L is labour force; A is the level of technology (exogenous); s is the saving rate; n is the population growth rate; 0

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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