An economy has the per-worker production
y = 3k^.5 Where y is output per worker a k is the capital-to-labor ratio.
1. A less-developed country has a saving rate of 10 percent per year and a population growth rate of 4 percent per year. A developed country has a saving rate of 28 percent and a population growth rate of 1 percent per year. The rate of depreciation in each country is 4 percent per year. Identify the steady state values of k, y, i, and c for each country.
2. Explain what policies might the less developed country pursue to raise its level of income?