Question

If the per-worker production function is given by y = k1/2, the saving rate (s) is 0.2, and the depreciation rate is 0.1, then the steady-state ratio of capital to labor is:

Answer 1

Explanation:

Condition that must be fullfiled:

i = (n+g+k)k

k - capital per labor, n - labor growth, g - technological growth

0.2k^(1/2)=(0+0+0.1)k

0.2k^(1/2)=0.1k

k^(1-1/2) = 0.2/0.1

k^(1/2)=2

k = 4