: This part considers a modified version of the Solow growth model. Suppose the production function is given by F(K,bN) = Kª(bN)!-a where b is the labour augmenting technology, which grows at a rate f, i.e., bị+1 = (1+ f)b.. For simplicity, assume that the total %3D factor productivity z = 1, and the population is constant, i.e., Ng = N for all t. The rest of the model is the same as in the standard Solow model in the textbook. Especially, the aggregate capital stock evolves according to Kt+1 = I; + (1 – d)Kt. And assume that the economy is still closed, and there is no government. For any aggregate variable X, let the lower case letter r be the variable per effective unit of worker; that is a = . ; Show that the production technology specified above satisfies the assumption of con- stant returns to scale.

: This part considers a modified version of the Solow growth model. Suppose the production function is given by F(K,bN) = Kª(bN)!-a where b is the labour augmenting technology, which grows at a rate f, i.e., bị+1 = (1+ f)b.. For simplicity, assume that the total %3D factor productivity z = 1, and the population is constant, i.e., Ng = N for all t. The rest of the model is the same as in the standard Solow model in the textbook. Especially, the aggregate capital stock evolves according to Kt+1 = I; + (1 – d)Kt. And assume that the economy is still closed, and there is no government. For any aggregate variable X, let the lower case letter r be the variable per effective unit of worker; that is a = . ; Show that the production technology specified above satisfies the assumption of con- stant returns to scale.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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