ECON304 - Assignment03 - F10

ECON304 - Assignment03 - F10 - Sonoma State University...

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Sonoma State University Department of Economics ECONOMICS 304 Florence Bouvet Assignment 3-Chapters 7-8 Due in class onOctober 14th the beginning of class Please tum in your answers on a separate page. 1) Country A and country Bboth have the production function: Y = F(K,L) = K 1I3 L 2I3 . Assume for both countries that populations are growing atthe rate of 3percent each year, that there isno technological progress, and that 7percent of capital depreciates each year. Assume further that country A saves 20 percent of output each year and country Bsaves 30percent of output each year. a) Compute the "per-worker" form of the production function above. b) Using this and the steady-state condition thatconsiders population growth, compute the steady-state level of capital per worker foreach country. c) Now compute the steady state level of consumption perworker ineach country. Since the golden rule isdefined asthe level ofcapital that allows the greatest
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