4. In a Solow-type economy, total national saving, S , t is S s hK

= −

t t t Y .

The extra term, −hK , t reflects the idea that when wealth (as measured by the capital stock) is higher, saving is lower. (Wealthier people have less need to save for the future.)

Find the steady-state values of per-worker capi tal, output, and consumption. What is the effect on the steady state of an increase in h?