1.

A). Assume the following information about Cape Littauer, an economy in steady state. Population growth n is 2 percent per year (n = 0.02), capital's share of income is 50 percent (alpha = 0.50), the capital-output ratio (K/Y) is 5, the total amount of capital K that depreciates in one year is 15 percent of one year's output Y, and the rate of growth of aggregate output Y is 7 percent per year (0.07). What is the steady-state growth rate of consumption per worker (C/L) in Cape Littauer?

Answer:

B). (Continuing the previous question.) Where is the steady-state level of capital per efficiency unit of labor (k = K/EL) relative to the Golden Rule level?

a. k* in Cape Littauer is below the Golden Rule level.

b. k* in Cape Littauer is equal to the Golden Rule level.

c. k* in Cape Littauer is above the Golden Rule level.

d. We do not have enough information to answer this question

definitively.

Answer: _____

C). (Continuing the previous question.) What is the savings rate s in Cape Littauer?

Answer: