Consider a hypothetical economy that has the production function Y = F(K, LE) = K¹/3 (LE) 2/3, where Y is output, K is capital, and LE is the number of effective workers. Suppose the saving rate is 20%, the capital depreciates by 3%, the population grows at the rate of 1%, and the rate of labor-augmenting technological change is 1%. b. At what rate (%) do the following grow in the steady state? i. Total output Output per worker ii. iii. Output per effective worker iv. Real rental price V. Real wage

Consider a hypothetical economy that has the production function Y = F(K, LE) = K¹/3 (LE) 2/3, where Y is output, K is capital, and LE is the number of effective workers. Suppose the saving rate is 20%, the capital depreciates by 3%, the population grows at the rate of 1%, and the rate of labor-augmenting technological change is 1%. b. At what rate (%) do the following grow in the steady state? i. Total output Output per worker ii. iii. Output per effective worker iv. Real rental price V. Real wage

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter9: Production Functions

Section: Chapter Questions

Problem 9.2P

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