1. Consider a country in which Y = 200 K2/5N3/5. Assume in this country they save 20% of their income, population grows at 3% per year, and depreciation of capital occurs at 10% per year. Use the Solow model. a. Compare the effectiveness of i) a 50% increase in the savings rate (to 30%), ii) a 67% decline in the population growth rate (to 1%), and iii) a 10% increase in productivity (to 220). That is, for each, give the percent by which it increases long-run average income (y*) and long-run average consumption (c*).

b. Give three policies that might be expected, respectively, to raise the savings rate, lower the population growth rate, and raise productivity. c. In this numerical example, which of the policy changes i)-iii) has the greatest impact on long- run well-being (assuming each policy has zero costs)?