Posted by **Matty** on Tuesday, November 22, 2011 at 8:49pm.

Suppose the production function is Y = 100(K3/10)(EN)7/10 and capital lasts an average of fifteen years. The rate of population growth is 0.5%. The rate of technological progress is 2.5%. The saving rate is 5%.

A. Derive the equation for output per effective worker y = Y/EN = f(k), where k equals the amount of capital per effective worker.

B. Calculate the steady state levels for each of the following: (1) capital per effective worker, (2) output per effective worker, and (3) consumption per effective worker.

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