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An economy is described by the following equations: Yt(subscript) = K0.5t(subscript) L0.5, s = 0.2, δ = 0.1 (no population growth).

(a) Find the steady state values for k,y,c,i (all expressed in per-capita form)

(b) What are the values of k and y if the economy operates at the Golden Rule level of capital accumulation?

(c) Imagine that you want to drive the economy to the Golden Rule steady-state. What is the saving rate you need to impose? What would be the level of c?

(d) Assuming that you impose the new saving rate, what would be the immediate and long-run effects on c,k, and y (i.e. draw the path of these variables over time).

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91796034

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