Macroeconomics - Production Function
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A countries production function is Y=5K^.5 L^.5
Assume that the rate of depreciation as well as the rate of saving are each .10. Also assume that there is no technological nor population growth.
A. What is the steady state level of capital per worker?
B. What is the steady state level of output per worker?
C. Suppose that the savings rate remains at .10 while the rate of depreciation increases to .20. What now happens to steady state level of capital per worker and output per worker.
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Y = 5 K^0.5 L^0.5
Y/L = 5 K^0.5 L^0.5 / L = 5 K^0.5 / L^0.5 = 5 (K/L)^0.5 = 5 Ö(K/L) = 5Ök, where k = ...
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