Given a saving rate of 5%, a depreciation rate of 1%, and a production function in which y = k0.5 where y is output per worker and k is capital per worker, calculate the steady state values for ii. output per worker, iii. consumption per worker, iv. Calculate the golden rule steady state level of capital

Given a saving rate of 5%, a depreciation rate of 1%, and a production function in which y = k0.5 where y is output per worker and k is capital per worker, calculate the steady state values for ii. output per worker, iii. consumption per worker, iv. Calculate the golden rule steady state level of capital

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter20: Economic Growth In The Global Economy

Section: Chapter Questions

Problem 1P

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Given a saving rate of 4%, a depreciation rate of 1%, and a production function inwhich y = k0.5 where y is output per worker and k is capital per worker, calculate thesteady state values fori. capital, ii. output, iii. consumption, and calculate the golden rule steady state level of capital
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Question 3Consider an economy described by the production function:Y = F(K, L) = K0.3 L0.7 a. What is the per-worker production function?b. Assuming no population growth or technological progress, find the steady-state capital stock per worker, output per worker, and consumption per worker as a function of the saving rate and the depreciation rate.c. Assume that the depreciation rate is 10 percent per year. Make a table showing steadystate capital per worker, output per worker, and consumption per worker for saving ratesof 0 percent, 10 percent, 20 percent, 30 percent, and so on. (You will need a calculator with an exponent key for this.) What saving rate maximizes output per worker? What saving rate maximizes consumption per worker?