Question: Suppose that the production function is given by Y=(K ) x (N 1- ), where K is the capital stock, N is the labour force

Suppose that the production function is given by Y=(K) x (N^1-), where K is the capital stock, N is the labour force and the share of capital.

a) Derive the capital accumulation curve

b) Calculate the steady-state value of capital and output per worker.

c) Assume that the saving rate increases, graphically illustrate and clearly explain what happens as the economy adjusts to the higher saving rate. How do these graphs differ from the Solow model with technological progress?

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