that 4 percent of capital depreciates each year. Assume further that country A saves 24 percent of output each year and country B saves 16 percent of output each year. Using your answer from part a) and the steady-state condition, find the steady-state level of capital per worker for each country. Then find the steady-state levels of income per worker for each country and steady-state level of consumption per worker for each country.
1. Country A and B both have the production function
Y = F (K, L) = K ½
L ½
or Y = K0.5 L
0.5
a) What is the per-worker production function, y= f (k)? Please make sure to write specific
functional form of the per-worker production function.
b) Assume that neither country experiences population growth nor technological progress
and that 4 percent of capital
percent of output each year and country B saves 16 percent of output each year. Using your
answer from part a) and the steady-state condition, find the steady-state level of capital per
worker for each country. Then find the steady-state levels of income per worker for each
country and steady-state level of consumption per worker for each country.
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