申論題

4.  Consider a modified Solow growth model with long run technology progress.Specifically, the aggregate production function is
Y = F(K,bN)
where K is capital, b denotes the number of unit of "human capital", bN is the efficient unit of labor. Letting 8' denote the future human capital per worker, assume that b' = (1+ f)b, where f is the growth rate in human capital. Besides, the labor input N evolves according to N' = (1 + n)N, where N' is the future labor input, and n is the growth rate of N. The economy is closed, and the econony's saving rate is ixed and given by s. Capital's depreciation rate is given by d. Use I to denote investment

(c) Draw a graph to show that this econon omy will reach a long run equilib- rium with a constant . State the nece essary assumptions to have this long run equilibrium. Provide the economic meanings of your assumptions.