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A country is described by the Solow model with a production function of y k½Suppose that k is equal to 400 The fraction of output invested is 50% The deprecation rate is 5% Is the country at its

  1. A country is described by the Solow model, with a production function of y=k½Suppose that k is equal to 400 The fraction of output invested is 50% The deprecation rate is 5% Is the country at its steady state level of output per worker, above the steady state, or below the steady state? Show how you reached your conclusion

 

 

2 In Country 1 the rate of investment is 5%, and in Country 2 it is 20% The two countries have the same level of productivity, A, and the same rate of deprecation, ? Assuming that the value of ? is 1/3, what is the ratio of steady state output per worker in Country 1 to steady state per worker in Country 2? What would the ratio be if the value of ? were 2/3?

May 15 2020 View more View Less

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