1. Suppose there is a country called Solowland whose output (Y) is produced using capital (K),...

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1. Suppose there is a country called Solowland whose output (Y) is produced using capital (K), labour (L) according to the following aggregate production function: 3 Y = AK¹L² where A is Total Factor Productivity (TFP). The rate of population growth (n) is 2.5% per year (0.025). The rate of depreciation of capital is 15% per year (0.15). Total factor productivity equals 20 (A=20) and we assume there is no technical progress (growth rate of A is zero). 1. Suppose there is a country called Solowland whose output (Y) is produced using capital (K), labour (L) according to the following aggregate production function: 3 Y = AK¹L² where A is Total Factor Productivity (TFP). The rate of population growth (n) is 2.5% per year (0.025). The rate of depreciation of capital is 15% per year (0.15). Total factor productivity equals 20 (A=20) and we assume there is no technical progress (growth rate of A is zero).

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