Q. Suppose that we modify the Solow growth model by allowing long-run technological progress. That is, suppose that z = 1 for convenience, and that there is labor-augmenting technological progress, with a production function Y= F(K,bN), where b denotes the number of units of "human capital" per worker, and bN is "efficiency units" of labour. Charter b' denote future human capital per worker, assume that b' = (1 + j) b, where fist he 12. Growth rate in human capital.
Show that the long run equilibrium has the property that k** = ~ is a constant. Illustrate the rate that does aggregate output, aggregate investment, aggregate consumption as well as per- capita income grow in this steady state, Explain?