Question: Consider the Solow model with the production function, y=Ak1/2 wherey(=Y /L) is output per worker, A is productivity, and k(=K/L) is capital per worker. The

Consider the Solow model with the production function, y=Ak1/2

wherey(=Y /L) is output per worker, A is productivity, and k(=K/L) is capital per worker.

The capital accumulation equation is

k=y(n+)k

(a) What are the expressions for steady state values of y and k?

(b) Consider the following two scenarios

(a) A natural disaster destroys half of the capital but does not cause any death.

(b) A pandemic kills half of the population but does not destroy any physical capital.

Compare and contrast the (a) The effects on k in the immediate aftermath, (b) and with the help of diagrams the subsequent growth paths of k and new steady states (if any).

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