Question: Can someone help me with 2A and 2B II. Predicting the Output Gap using a Solow Growth Model Augmented with Human Capital (35 Points) Let

Can someone help me with 2A and 2B

Can someone help me with 2A and 2B II. Predicting the Output

II. Predicting the Output Gap using a Solow Growth Model Augmented with Human Capital (35 Points) Let us consider a Solow growth model in which the aggregate output/income at time tfor country / : Yt' is described by the following aggregate production function: Yi = ( Ki ) ' - (hill ) B where K; is the aggregate physical capital in country / , h' is the human capital per capita in country /, Lt is the aggregate population size in country / and B' E (0,1) is the labour share of output parameter in country /. The equilibrium law of motions of the physical capita per capita: k; from time t to time t+1 in country / is governed by the following equation: kit - ki = Y'yE - (n' + 8 ) k; 1 + ni where yt is the output per capita in country i, n' E (-1, too) represents the growth rate parameter of the population in country i, y' E (0,1) denotes the investment rate parameter in country / and S' E (0,1) is the depreciation rate parameter in country /. a. Write-down the production function in per capita units for country /. (5 points) b. Derive the steady-state income per capita formula for country / and the steady-state income per capita gap formula between country / and country j. (10 points)

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