Y KLE1 The economy has a capital share of a quarter a savin

Y = K?(LE)1-?. The economy has a capital share of a quarter, a saving rate of 48 percent, a depreciation rate of 2 percent, a rate of population growth of 1 percent, and a rate of labor-augmenting technological change of 3 percent. It is in steady state. a. At what rates do total output, output per worker, and output per effective worker grow?

Output per Effective Worker is:

Solution

At the steady state output per effective worker remains constant,output per physical worker grows at rate g=3%,total output grows at rate n+g = 4%.