Suppose that an economy has the following production function: Y = F(K, LE) = K1/2(LE)1/2 Assume that the rate of depreciation is 5 percent per year (d = .05), the rate of population growth is 3 percent per year (n = .03), the rate of labor efficiency growth is 3 percent per year (g=.03) and the saving rate is 60 percent (s = 0.6). Calculate the per effective worker production function, the steady-state levels of capital per effective worker (k*), output per effective worker (y*), consumption per effective worker (c*), and investment per effective worker (i*). %3D

Suppose that an economy has the following production function: Y = F(K, LE) = K1/2(LE)1/2 Assume that the rate of depreciation is 5 percent per year (d = .05), the rate of population growth is 3 percent per year (n = .03), the rate of labor efficiency growth is 3 percent per year (g=.03) and the saving rate is 60 percent (s = 0.6). Calculate the per effective worker production function, the steady-state levels of capital per effective worker (k), output per effective worker (y), consumption per effective worker (c), and investment per effective worker (i). %3D

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter25: Production And Growth

Section: Chapter Questions

Problem 1CQQ

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