# You are given the following information concerning the relationship between the capital-labor ratio and output per person

## Question:

Capital-labor ratio

Output per person

(a) Suppose that the savings rate, s, equals 0.1; the population growth rate, n, equals 0.01; and the depreciation rate, d, equals 0.1. Calculate the amounts of savings per person and steady-state investment per person at each of the capital-labor ratios given in the table above. Calculate the values of the steadystate capital-labor ratio and steady-state output per person.

(b) Suppose that the population growth rate, n, decreases to 0.005, but there are no changes in the savings and depreciation rates. Calculate the new amount of steady-state investment per person at each of the capital-labor ratios given in the table above. Calculate the new steady-state values of the capital-labor ratio and output per person.

(c) Suppose that the savings rate, s, increases to 0.125, but the population growth and depreciation rates are the same as in part a. Compute the new amount of savings per person at each of the capital-labor ratios given in the table above. Then explain the new steady-state values of the capital-labor ratio and output per person.

## Step by Step Answer:

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