# Consider a closed economy in which the population grows at the rate of 1% per year. The

## Question:

a. Households consume 90% of income and save the remaining 10% of income. There is no government spending. What are the steady-state values of capital per worker, output per worker, consumption per worker, and investment per worker?

b. Suppose that the country wants to increase its steady-state value of output per worker. What steady-state value of the capital-labour ratio is needed to double the steady-state value of output per worker? What fraction of income would households have to save to achieve a steady-state level of output per worker that is twice as high as in part(a)?

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**Related Book For**

## Macroeconomics

**ISBN:** 978-0321675606

6th Canadian Edition

**Authors:** Andrew B. Abel, Ben S. Bernanke, Dean Croushore, Ronald D. Kneebone