Essay
Country A has a capital-labor ratio that is initially twice as big as that of country B,but neither is yet in a steady state.Both countries have the same production function,f(k)= 6k1/2.Country A has a 10% saving rate,10% population growth rate,and 5% depreciation rate,while country B has a 20% saving rate,10% population growth rate,and 20% depreciation rate.
(a)Calculate the steady-state capital-labor ratio for each country.Does the initial capital-labor ratio affect your results?
(b)Calculate output per worker and consumption per worker for each country.Which country has the highest output per worker? The highest consumption per worker?
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(a)Using the formula sf(k)= (n + d)k,cou...View Answer
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