Macroeconomics Problem Set 3
... Assignment 3 CHAPTER 9: ECONOMIC GROWTH, TECHNOLOGY, EMPIRICS, AND POLICY Suppose an economy described by the Solow model has the production function Y=K1/2(LE)1/2.
a. For this economy, find an expression for output per effective worker, y = f(k).
k is the output per effective worker, we ignore labor.
b. Use your answer to part (a) to solve for the steady-state value of y as a function of s, n, g, and δ.
Putting this to the production function we get;
c. Two neighboring economies, Atlantis and Xanadu, have the same above production
function, but different population growth rates and different savings rates. Atlantis has a
saving rate of 28% and a p...