Suppose initially (period 0) the economy is endowed with $5 (billion) of capital stock and 10 (thousand) workers (let's ignore the units). We know that saving rate s is 0.15, population growth rate n is 0.01 and depreciation rate d is 0.09.
Suppose that the production function takes the form:
Y = K0.3N0.7
What is the per worker production function in terms of capital-worker ratio? Based on this information, calculate:
a) capital per worker and output per capita in period 1 and 2
b) capital per worker and output per capita in steady state