Given the production function Y = AK^0.3L^0.7 and fixed values for the saving rate and depreciation, if productivity is growing at an average rate of three percent, and the labor input grows at two percent, there is a unique growth rate of capital that is sustainable. That is, if the growth rate of capital is either higher or lower than this steady-state value, then it must eventually change, even if nothing else in the economy changes. Calculate this steady-state growth rate of capital and explain why it alone is a sustainable rate.

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Answer In developed countries there is lot f money Hhrat has already been invested the sauings rate ... View the full answer