Find: the Steady State of Equilibrium of capita-labor or K

Given: Depreciation .05 , Savings rate .10

Step 1 Solve for K.

Formula : SY = dk

.10 K ½ = .05 K

.10 K ½ = K
.05
½
2K =K
2 = K1
K½
2= K (1-1/2)

½
2 =K

( 2 ) 2 = (K ½)2

4 = K 2/2

4 = K1 ,K=4

Exponent:

1 -1/2 = 2- 1 = 1/2

2
2.) Solve for SSE for Y.

Y = K 1/2
Y = 4 (1/2)
Y = √4 = 2

3.) Find the SSE for consumption

C ¿ (1 - S) Y
C = ( 1 - .10) 2
C = ( .9) 2 , C = 1.8
4. Find SSE for Investment i.

i = SY
i = (.10) (2) = .20

5. Double check with closed economy equation

Y= C + i.
Y = 1.8 + .20
Y =2