An economy described by the Solow growth model has the following production function:
y = √k.
a. Solve for the steady-state value of y as a function of s, n, g, and d.
b. A developed country has a saving rate of 28 percent and a population growth rate of 1 percent per year. A less-developed country has a saving rate of 10 percent and a population growth rate of 4 percent per year. In both countries, g = 0.02 and d = 0.04. Find the steady-state value of y for each country.
c. What policies might the less-developed country pursue to raise its level of income?