Suppose an economy has the following production function, Ask an Expert

Economics

Suppose an economy has the following production function: Y=F(K,L)=K0.4L0.6

[A] Determine the per worker production function.

[B] If the savings rate is 0.2 and the depreciation rate is 0.05, calculate the steady-state capital stock per worker, output per worker, and consumption per worker.

[C] Now assume the government raise spending, decreasing the country's savings rate to 0.1. Redo the computation in (b) based upon this change. What is the effect on the government spending on the economy.

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Macroeconomics, Economics

Category:- Macroeconomics
Reference No.:- M9308956

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