Question

Consider the following AK model where the production function is given by
$𝑌 = 𝐴𝐾$
where 𝑌 is output, 𝐾 is capital, and 𝐴 is a constant that reflects the level of technology. Suppose there is zero technological progress in the economy and 𝐴 = 0.50. In the economy, the savings rate equals 0.60 and the depreciation rate for the capital stock equals 0.05. The population growth rate equals zero and the size of the labour force is normalised to 1. Based on the AK model, the steady state growth rate of output per capita in the economy equals ______ percent (in integer).

Answer 1

The correct answer is :25