1. (30 points) Consider an economy that is described by the Solow growth model. The output is produced with the following production function: Y; = Kfl(AtLt), where K; is the amount of capitalI and L: is the amount of labour used in production in period t. A: is the labour-augmenting productivity that grows at rate 9 = 0.02, while the population grows at rate n. = 0.01. Capital depreciation rate is equal to 5 = [1.1. (a) Suppose the savings rate is equal to .3. Find the steady state in this economy. What happens to the capital per capita, output per capita and consumption per capita in the steady state? (b) Find the golden rule level of capital per effective worker. Find the savings rate that would lead to this level of capital per effective worker in the steady state, s9. [3] [3]