Question

In the Solow model, if y equals 2 times the square root of k, s=0.25, n=0.1, d=0.4, what is the value of the steady-state capital per worker k?

Answer 1

In the Solow model, the steady-state capital per worker k can be found by setting the saving rate s equal to the depreciation rate d plus the growth rate of the labor force n and solving for k. Given the specific values provided, the steady-state capital per worker k is 1.

Step-by-step explanation:

In the Solow model, the steady-state capital per worker k can be found by setting the saving rate s equal to the depreciation rate d plus the growth rate of the labor force n and solving for k.

Given that y = 2√k, we can rewrite the equation for the steady-state capital per worker as:

s * y = (n + d) * k

Substituting the given values, we have:

0.25 * (2√k) = (0.1 + 0.4) * k

Simplifying this equation, we get:

0.5√k = 0.5k

Dividing both sides of the equation by 0.5k, we obtain:

√k = k

Squaring both sides of the equation, we find:

k = k * k

Dividing both sides of the equation by k, we get:

1 = k

Therefore, the value of the steady-state capital per worker k is 1.