In the Solow model, consider an economy with an aggregate production function Y = KON)-B, where Y., K, N., and A are out

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In The Solow Model Consider An Economy With An Aggregate Production Function Y Kon B Where Y K N And A Are Out 1 (48.43 KiB) Viewed 80 times

c.illustrate the steady state level of normalized capital on a
graph.
In the Solow model, consider an economy with an aggregate production function Y = KON)-B, where Y., K, N., and A are output, capital stock, number of workers, and efficiency of workers at time t. The number of workers grows over time at rate n, while the efficiency of these workers grow at rate g. Assume capital depreciates at a constant rate d and 0<B < 1. Last, assume the households' savings rate is s%. (a) Which normalization of the endogenous variables allows us to specifiy a steady state in the model (i.e. the normalized variables are constant in the long-run)? Explain why.