Growth Suppose that the economy’s production function is: ?? = ?? 0.35(???? ) 0.65 and that the saving rate (s) is equal to 10% and that the rate of depreciation (?) is equal to 2%. Further, suppose that the number of workers grows at 5% per year and that the rate of technological progress is 1% per year.
a. Find the steady-state values of:
• capital stock per effective worker
• output per effective worker
• consumption per effective worker
• the growth rate of output per effective worker
• the growth rate of output per worker
• the growth rate of output
• the growth rate of consumption
b. Suppose that the rate of technological progress speed up to 2% per year. Recompute the answers to part (a). Explain.
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