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Consider an economy described by the following production function Y=F(L,K)=L 0.8 K 0.2
A) Assuming no population growth or technological progress, find the steady state capital stock per worker, output per worker, consumption per worker and investment per worker given that the rate of saving is 20% and depreciation rate is 10%. show that the values computed above are steady state values. (limit calculated values to 10 decimals points)
B) How would the steady state outcomes above change if this economy increased its saving rate to 30% (Recalculate the steady state values)
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The questions posed are broad and open ended so be careful to allow yourself enough research and planning time.
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