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 on October 14th the beginning of class Please tum in your answers on a separate page. 1) Country A and country B both have the production function: Y = F(K,L) = K 1I3 L 2I3 . Assume for both countries that populations are growing at the rate of 3 percent each year, that there is no technological progress, and that 7 percent of capital depreciates each year. Assume further that country A saves 20 percent of output each year and country B saves 30 percent of output each year. a) Compute the "per-worker" form of the production function above. b) Using this and the steady-state condition that considers population growth, compute the steady-state level of capital per worker for each country. c) Now compute the steady state level of consumption per worker in each country. Since the golden rule is defined as the level of capital that allows the greatest level of consumption in steady state, which of these two countries has a steady
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This note was uploaded on 04/07/2011 for the course ECON 304 taught by Professor Eyler during the Fall '07 term at Sonoma.

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