Question 3 Consider two countries: St. Lucia and Barbados, labelled as L and B). In both countries the production function is Cobb--Douglas: Y = AK1/3L2/3 The population growth rate is 0.1, physical capital depreciates at the rate of 0.1, and A=1. In Guyana the savings rate is sL=0.2 and in Barbados it is sB=0.4. a. Write the production function in terms of output per capita (Y/N). b. Find the steady-state values of the capital-labor ratio (K/N) in both countries. c. Find the steady-state values of the output per capita (Y/N) in both countries. d. In which of the countries is consumption-per-capita higher in the steady‐state?

Question 3 Consider two countries: St. Lucia and Barbados, labelled as L and B). In both countries the production function is Cobb--Douglas: Y = AK1/3L2/3 The population growth rate is 0.1, physical capital depreciates at the rate of 0.1, and A=1. In Guyana the savings rate is sL=0.2 and in Barbados it is sB=0.4. a. Write the production function in terms of output per capita (Y/N). b. Find the steady-state values of the capital-labor ratio (K/N) in both countries. c. Find the steady-state values of the output per capita (Y/N) in both countries. d. In which of the countries is consumption-per-capita higher in the steady‐state?

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter17: Economic Growth: Resources, Technology, Ideas And Institutions

Section: Chapter Questions

Problem 3WNG

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