You are given the production function Y= AK 14H14 N 12, where A = 4. The population growth rate n is 0.025, the depreciation rate d is 0.075 (both physical and human capital depreciate at the same rate), and the growth rate of autonomous factors is zero. Investment I is the sum of two components, investment in physical capital Ik and investment in human capital In The fraction of GDP that goes to physical capital investment is SK 0.05 and the fraction of GDP that goes to human capital investment is SH = 0.05. (i) (ii) Convert the production function to a function relating Y/N to both K/N and H/N. Find the steady-state physical capital-labor ratio and the steady-state human capital - labor ratio. Find the steady-state per person output.
You are given the production function Y= AK 14H14 N 12, where A = 4. The population growth rate n is 0.025, the depreciation rate d is 0.075 (both physical and human capital depreciate at the same rate), and the growth rate of autonomous factors is zero. Investment I is the sum of two components, investment in physical capital Ik and investment in human capital In The fraction of GDP that goes to physical capital investment is SK 0.05 and the fraction of GDP that goes to human capital investment is SH = 0.05. (i) (ii) Convert the production function to a function relating Y/N to both K/N and H/N. Find the steady-state physical capital-labor ratio and the steady-state human capital - labor ratio. Find the steady-state per person output.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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