Problem 1 Production function is given by: Y=K" (AH)¹-a It stems from the production function that firms use three input

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Problem 1 Production Function Is Given By Y K Ah A It Stems From The Production Function That Firms Use Three Input 1 (45.72 KiB) Viewed 38 times

Problem 1 Production function is given by: Y=K" (AH)¹-a It stems from the production function that firms use three inputs: physical capital, K, human capital, H, and technology, A. The rate of growth of human capital AH/H=x, and the pace of labor (i.e. human capital) augmenting technological progress is g. The saving rate is s, and the rate of depreciation of physical capital equals d. Use the Solow growth model to answer the following questions. a) Compute the level of income per unit of effective labor (AH) in steady state. Calculate the rate of growth of GDP (Y) in steady state. b) Employers launched programs aimed at improving work motivation. As a result the production function takes the following form Y = K (AMH)", where M denotes the impact of work motivation programs on workers' productivity. The employers design new programs so that AM/M=z. Compute the level of income per unit of effective labor (AMH) in steady state. Calculate the rate of growth of GDP (Y) in steady state.