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- September 13, 2020
- By menge

Indonesia’s production function is Y=AK^a L^(1-a). Assume that A (technology) = 1 and a = .33. Additionally, Indonesia’s investment/savings rate is 10%. Indonesia has 50 units of capital per worker and a constant depreciation rate of 3%. Assume that Indonesia has a constant population growth rate of 1%.

a. Derive and compute Indonesia’s output per worker.

b. Derive and compute the steady-state(i.e., the steady state capital per worker) value of capital per worker for Indonesia.

c.Derive and compute the Steady-state value of output per worker for Indonesia.

d. Graph the Solow model, including the values of output per worker and capital per worker in the steady-state. Be sure to label your graphs correctly.