In the solow growth model suppose that the per-worker

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.

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

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

c. 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?