Question 3 Consider an economy described by the production function: Y = F(K, L) = K0.3 L0.7 a. What is the per-worker production function? b. Assuming no population growth or technological progress, find the steady-state capital stock per worker, output per worker, and consumption per worker as a function of the saving rate and the depreciation rate.
Question 3
Consider an economy described by the production function:
Y = F(K, L) = K0.3 L0.7
a. What is the per-worker production function?
b. Assuming no population growth or technological progress, find the steady-state capital stock per worker, output per worker, and consumption per worker as a function of the saving rate and the
c. Assume that the depreciation rate is 10 percent per year. Make a table showing steadystate capital per worker, output per worker, and consumption per worker for saving rates
of 0 percent, 10 percent, 20 percent, 30 percent, and so on. (You will need a calculator with an exponent key for this.) What saving rate maximizes output per worker? What saving rate maximizes consumption per worker?
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