Suppose that output is determined by the production function Y = K/51,315 Population growth (n) is...

 

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Suppose that output is determined by the production function Y = K²/51,315 Population growth (n) is 0.03, the depreciation rate (6) is 0.07, and the savings rate (s) is 0.20. [Please take note of these variables.] Assume no technological progress (g = 0). (Round your answers to three decimal points.) a. Find the steady state level of capital per worker, consumption per worker, and income per worker. YOU MUST SHOW ALL OF YOUR WORK TO RECEIVE CREDIT. b. What is the growth rate of income in steady state, and what is the growth rate of income per worker in steady state? Explain your answers. c. Suppose the savings rate rises to 0.30. Describe the impact of the savings rate increase on the growth rate of income per worker AND the growth rate of income during the transition to the new steady state. Be specific. d. What saving rate would you recommend to maximize economic well-being? YOU MUST SHOW ALL YOUR WORK TO RECEIVE CREDIT. [I recommend using a small Excel spreadsheet to illustrate how you arrived at your answer.] Suppose that output is determined by the production function Y = K²/51,315 Population growth (n) is 0.03, the depreciation rate (6) is 0.07, and the savings rate (s) is 0.20. [Please take note of these variables.] Assume no technological progress (g = 0). (Round your answers to three decimal points.) a. Find the steady state level of capital per worker, consumption per worker, and income per worker. YOU MUST SHOW ALL OF YOUR WORK TO RECEIVE CREDIT. b. What is the growth rate of income in steady state, and what is the growth rate of income per worker in steady state? Explain your answers. c. Suppose the savings rate rises to 0.30. Describe the impact of the savings rate increase on the growth rate of income per worker AND the growth rate of income during the transition to the new steady state. Be specific. d. What saving rate would you recommend to maximize economic well-being? YOU MUST SHOW ALL YOUR WORK TO RECEIVE CREDIT. [I recommend using a small Excel spreadsheet to illustrate how you arrived at your answer.]

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A The steady state level of capital per worker is found by solving the equation KL sn KL 020003 KL 6... View the full answer