Suppose an economy described by the Solow model has the following production function: Y = K/(LE)/2...

     

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Suppose an economy described by the Solow model has the following production function: Y = K¹/²(LE)¹/2 a. For this economy, what is f(k*)? [k*=K/LE] b. Use your answer to part (a) to solve for the GOLDEN RULE value of KG, YG as a function of n, g and 6. (n is a population growth, g is a technology progress and 6 is a depreciation rate.) c. Two neighboring economies have the above production function, but they have different parameter values. Country A has a population growth at 2 percent per year and has a depreciation rate at 2 percent. Country B has a population growth at 3 percent per year and has a depreciation rate at 3 percent. In both countries, the technology progress is at 4 percent. Find the GOLDEN RULE value of ye for each country. d. Currently, people in Country A save 65% of their income and people in country B save at 45% of their income. What should both countries have to do in order to reach the GOLDEN RULE point? e. Find the GOLDEN RULE value of consumption per effective worker (CG) for each country. Suppose an economy described by the Solow model has the following production function: Y = K¹/²(LE)¹/2 a. For this economy, what is f(k*)? [k*=K/LE] b. Use your answer to part (a) to solve for the GOLDEN RULE value of KG, YG as a function of n, g and 6. (n is a population growth, g is a technology progress and 6 is a depreciation rate.) c. Two neighboring economies have the above production function, but they have different parameter values. Country A has a population growth at 2 percent per year and has a depreciation rate at 2 percent. Country B has a population growth at 3 percent per year and has a depreciation rate at 3 percent. In both countries, the technology progress is at 4 percent. Find the GOLDEN RULE value of ye for each country. d. Currently, people in Country A save 65% of their income and people in country B save at 45% of their income. What should both countries have to do in order to reach the GOLDEN RULE point? e. Find the GOLDEN RULE value of consumption per effective worker (CG) for each country.

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a The production function is given as Y K2 LE12 To find fk we can substitute Y into the per capita p... View the full answer