EC 390 - HW #3 - EC390 Fall 2009 Ke Pang Problem Set#3 Due...

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EC390 Fall 2009 Ke Pang Problem Set #3 Due: Tuesday, November 3 in class Be sure to show your work and the reasoning used to obtain your answer. The following information must be on your assignment: name, student number, session (A: 11:30-12:50; B: 1:00-2:20) . 1. Consider the Solow model with population growth and technological progress. The production function is given by Y = K 1 2 ( AN ) 1 2 . (a) Write the production function in per e ff ective worker terms. (b) Solve for the steady state value of capital per e ff ective worker ( ˆ k * ) as a function of s , δ , g N , and g A . (c) Suppose s = 0 . 2, δ = 0 . 10, g N = 0 . 01, and g A = 0 . 02. Calculate the steady state values of capital per e ff ective worker ( ˆ k * ). (d) Consider a country called Tusa, which starts with ˆ k 1 = 2 and A 1 = 1 in year 1. Calculate Tusa’s output per e ff ective worker, and output per worker for year 1: ˆ y 1 and y 1 . Then, calculate the change in its capital per e ff ective worker in year 1: Δ ˆ k 1 . Use this to calculate the level of capital per e ff ective worker for year 2: ˆ k 2 . Finally, calculate the level of technology
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