Assume That a Country's Per-Worker Production Is Y = K^1/2

question 67

Essay

Assume that a country's per-worker production is y = k^1/2, where y is output per worker and k is capital per worker. Assume also that 10 percent of capital depreciates per year (= 0.10) ² and there is no population growth or technological change.
a.If the saving rate (s) is 0.4, what are capital per worker, production per worker, and consumption per worker in the steady state?
b.Solve for steady-state capital per worker, production per worker, and consumption per worker with s = 0.6.
c.Solve for steady-state capital per worker, production per worker, and consumption per worker with s = 0.8.
d.Is it possible to save too much? Why?

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