Torres08
Badges: 2
Rep:
?
#1
Report Thread starter 2 years ago
#1
Hi, I was wondering if anyone could help me find a solution to the following problem relating to the Solow growth model:

Consider an economy with no population growth and no technological progress described by the production
function Y=K^0.3L^0.7 , where Y is output, K is capital stock and L is labour.

Assume that 30 per cent of output is saved (s=0.3), 10 per cent of the capital stock depreciates every year
(δ=0.10), and the economy starts off with 2 units of k in year 1 where k=K/L.
(A) Find the level of k at the beginning of year 2.
(B) Find the steady state of level of capital per worker ( k*), the steady state level of output per worker
(y*) and the steady state level of consumption per worker (c*).

Any help would be greatly appreciated.
0
reply
X

Quick Reply

Attached files
Write a reply...
Reply
new posts
Back
to top
Latest
My Feed

See more of what you like on
The Student Room

You can personalise what you see on TSR. Tell us a little about yourself to get started.

Personalise

Do you have the space and resources you need to succeed in home learning?

Yes I have everything I need (71)
67.62%
I don't have everything I need (34)
32.38%

Watched Threads

View All