|Consider the Solow model. The economy of Oz produces its output using capital and labor. The labor force is growing at 2% per year. At the same time, there is technical progress at the rate of 3% per...

Extracted text: |Consider the Solow model. The economy of Oz produces its output using capital and labor. The labor force is growing at 2% per year. At the same time, there is technical progress at the rate of 3% per year, so that each unit of labor is becoming more productive. Suppose that the depreciation rate is 10% and the savings rate is 20%. How fast is the effective labor force growing in the land of Oz? What is the growth rate of per capita income in the long run? And what is the growth rate of total national income in the long run?