An economy described by the Solow growth
model has the following production function:
y = k.
a. Solve for the steady-state value of y as a function
of s, n, g, and d.
b. A developed country has a saving rate of 28
percent and a population growth rate of 1
percent per year. A less developed country has
a saving rate of 10 percent and a population
growth rate of 4 percent per year. In both
countries, g = 0.02 and d = 0.04. Find the
steady-state value of y for each country.
c. What policies might the less developed country
pursue to raise its level of income?