An economy (country A) has a Cobb-Douglas production function: Y = K0.4 (LE) 0.6 The economy has a saving rate of 48 percent, a depreciation rate of 2 percent, a rate of population growth of 1 percent, and a rate of labor-augmenting technological change of 3 percent.

Assume there is a second economy (country B) with everything identical to country A except for the rate of population growth, which is 2 percent.

Assume there is a third economy (country C) with everything identical to country B except for the rate of technological growth, which equals 1 percent.

Assume all countries start a k = 0, which country • (2 points) grows more in the long run (once steady state is reached), as given by the rate of growth of output per worker? • (2 points) will have higher output per worker in the long run?

Answer rating: 100% (QA)

To analyze the growth and output per worker in the long run for each country we can use the Solow gr... View the full answer