Explain the immediate and the steady-state effects

Reference no: EM132141987

Question: Consider the two-sector endogenous growth model Y = F[K, (1-u)LE] Output per effective worker is y = f(k, 1-u)

a. What is the steady-state growth rate of output per worker Y/L? How do the savings rate s and the fraction of the labor force in universities u affect this steady-state growth rate?

b. On a graph show the impact on capital and output of an increase in u. Explain the immediate and the steady-state effects

c. Is an increase in u an unambiguously good thing for the economy? Why or Why not?

Reference no: EM132141987

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