Question

Consider an economy: Y=4K.5N.5S=0.3Yd=5%n=5%a)What are the steady-state values of capital-labor ratio? Output per worker? Consumption per worker?b)Suppose that the government institutes a policy that encourages savings increasing it to 40% instead of 30%. Show graphically and calculate all the steady state values.c)Instead of encouraging savings suppose that the government institutes a policy that discourages population growth decreasing it from 5% to 3%. Show graphically and calculate all the steady state values.

Answer 1