Suppose that the per-worker production function is given by

Question

Question - In the Solow growth model, suppose that the per-worker production function is given by y = zk³, with s = 0.25, d = 0.1, and n = 0.02.

1. Suppose that in country A, z = 1. Calculate per capita income and capital per worker.

2. Suppose that in country B, z = 2. Calculate per capita income and capital per worker.

3. As measured by GDP per capita, how much richer is country B than country A? What does this tell us about the potential for differences in total factor productivity to explain differences in standards of living across countries?