Question: Suppose instead the closed economy has an aggregate production function given by the following expression Y = 15K0.50 (ExL) 0.50 is experiencing an annual
Suppose instead the closed economy has an aggregate production function given by the following expression Y = 15K0.50 (ExL) 0.50 is experiencing an annual population and labour force growth rate of 2.5%, the effectiveness of labour (E) is growing by 2.5% annually, each year 15% of their capital depreciates and the economy has a saving rate equal to 20%. Use the growth accounting relationship to write down an expression for the annual growth rate of real output in the very long-run and use this expression to determine this growth rate. What are the very long run annual growth rates of aggregate real capital and consumption equal to?
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