05 Jun Question For the following problem from chapter
Question
For the following problem from chapter 8, please write down equations, step by step derivations, and explain thoroughly every step you are taking. Basically assume that I don’t know much about this topic, and you are trying to explain it to me from scratch. 1. Country A and Country B both have the following production function Y = F (K, L) = K1/3L2/3 a. Does this production function have constant returns to scale? Explain. b. What is the per-worker production function y=f(k)? c. Assume neither country experiences technological progress or population growth and that 20% of capital depreciates each year. Assume further that country A saves 10% of output each year and country B saves 30% of output each year. Using your answer from part b. and the steady-state condition that investment equals depreciation, find the steady-state level of capital per worker for each country. Then find the steady state levels of income per worker and consumption per worker. d. Suppose that both countries start off with a capital stock per worker of 1. What are the levels of income per worker and consumption per worker?
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