Question

3-a country called dontThinkLand has the following parameters: =0.15 s=0.2 n=0.1 g=0 a- what is the economy's per effective labor output (y= Y/EL and the k = K/EL and c= C/EL) in the steady state? k= y = b-after reaching the steady state, what is the growth in per capita output (Y/L): 4-a country called smartPeopleLand has the following parameters: s=0.2 0.15 n 0.1 g=0.3 a- what is the economy's per effective labor output (y= = K/EL and c= C/EL) in the steady state? Y/EL and the k k = y= tnan a V b-after reaching the steady state, what is the growth in per capita output (Y/L): MG 883 5-which of those countries would you rather live in and why? dentsCht2 MPK =(5+n+g) a- You want to use this condition to get golden rules for both dontThink Land (remember ð = 0.15 n-0.1 g=0) S= b-if people save using the golden rule , get k K/EL , y Y/EL and c C/EL at the steady state: k= MG y dentsCh c- You want to use this condition to get golden rule s for both SmartPeopleLand Land (remember = 0.15 n 0.1 g 0.3) b-if people save using the golden rule, get k K/EL, y- Y/EL and c C/EL at the steady state: I term Soluti k= tnam, Br a Vat po y MG8834 pg dentsCht2.paf Capital per person changes according to this law k (5+n+ g) k kt+l

Answer 1

Answer;

3) a) Y = √K* √(EL)

Per capita effective output, y` = Y/EL

y` = √k`

k `= K/EL

So in steady state

sy` = (d+n+g)k`

s√k` = .25k`

.2/.25 =√ k`

k*` = .64

y*` = .8

c*` = (1-s)*y`

= .8*.8

= .64

b)growth in per capita output =

y = Y/L = y`*E

gy= gy` + gE

= 0 + 0

So growth rate is zero