題組內容

8. Consider the Solow model. Country A has a capital-labor ratio (k) that is initially twice as big as that of country B, but neither is yet in a steady state. Both countries have the same production function, $$f(k) = 6k^{1/2}$$. Country A has a 10% saving rate, 10% population growth rate, and 5% depreciation rate, while country B has a 20% saving rate, 10% population growth rate, and 20% depreciation rate.

a. Calculate the steady-state capital-labor ratio for each country. How does the initial capital-labor ratio affect your results? (6%)