= = = Question 2: (5 points) Consider the Solow growth model. Suppose that F(K,N) = zk“N1-a, where a = 0.3. Also, assume

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Question 2 5 Points Consider The Solow Growth Model Suppose That F K N Zk N1 A Where A 0 3 Also Assume 1 (71.27 KiB) Viewed 34 times

= = = Question 2: (5 points) Consider the Solow growth model. Suppose that F(K,N) = zk“N1-a, where a = 0.3. Also, assume that capital depreciation rate is 10% (that is d = 0.1), savings rate is 25% (that is s = 0.25), populations growth rate is 2% (that is n = 0.02), and z = 2. First, determine capital per worker, income per capita, and consumption per capita in the steady state. Second, assume that the savings rate has increased to 40% but the total factor productivity decreases to 1. Discuss the effect of savings and productivity on the steady state level of consumption per worker.