Consider an Economy in steady state, with a Cobb Douglas Production function. They have a savings rate of 45% and a capital share of 2/7. Technological progress is 1%, population growth is 3%, and Depreciation is 5%. 1. Derive the Production function per effective worker and solve for steady state capital, output, and consumption per effective worker. 2. What is MPK in the steady state? Is this country saving too much or too little? How do you know? 3. What should you lower or raise the saving rate to, in order to reach the golden rule steady state

Consider an Economy in steady state, with a Cobb Douglas Production function. They have a savings rate of 45% and a capital share of 2/7. Technological progress is 1%, population growth is 3%, and Depreciation is 5%. 1. Derive the Production function per effective worker and solve for steady state capital, output, and consumption per effective worker. 2. What is MPK in the steady state? Is this country saving too much or too little? How do you know? 3. What should you lower or raise the saving rate to, in order to reach the golden rule steady state

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter16: Economic Growth

Section: Chapter Questions

Problem 2E

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