321HW11Sp02 - Instructor Kim H.H Spring 2011 Intermediate...

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Instructor : Kim, H.H. Intermediate Macro Analysis Spring 2011 Economics 01:220:321 1 Assignment II DUE DATE :Monday, March 7, 2011. In-class. 1. Assume that a country's per-worker production is 1/2 y k , where y is output per worker and k is capital per worker. Assume also that 10 percent of capital depreciates per year (= 0.10). 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? (Hint: Use sy k and 1/2 y k to get an equation in s, , k, and 1/ 2 k , and then solve for k.) 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? 2. Assume that an employer believes that the “efficiency” (e) it can get from a particular worker, as a function of the hourly wage (w), is given by function e = –0.125w + 0.15w2 – 0.005w3, at least up to a wage of 30.
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