1. Consider the re-modification of the Solow growth model from labour-augmenting to capital-augmenting, so that a balanc

[answerhappygod]

1 Consider The Re Modification Of The Solow Growth Model From Labour Augmenting To Capital Augmenting So That A Balanc 1 (170.2 KiB) Viewed 33 times

1. Consider the re-modification of the Solow growth model from labour-augmenting to capital-augmenting, so that a balanced growth path exists, assume that the production function is Cobb-Douglas: Y(t) = [A(t)K(t)]ªL(t)¹-a. Assume that A grows at rate µ: A(t) = µA(t). Show that the economy converges to a balanced growth path, and find the growth rate of K on the balanced growth path. [10 marks]