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Suppose and economy described by the Solow model has the following production function:
Y = K1/2(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 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 saving 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.
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