Two neighboring economies have the above production function

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Reference no: EM13818309

Suppose and economy described by the Solow model has the following production function:

Y=K^1/2(LE)^1/2

a) For this economy what is f(k) ?

b) Use your answer to part a). To solve for the steady state value of y as a function of exogenous variables s, n, g and δ?

c) Two neighboring economies have the above production function, but they have different parameter values. Atlantis has a saving rate of 28%, and a population growth rate of 1% per year. Xanadu has a savings rate of 10% and a population growth rate of 4% per year. In both countries g=-0.02 and δ=0.04. Find the steady state value of y for each country.

Reference no: EM13818309

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