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1. Solve for the steady state level of capital per worker as a function of & and s. 2. Solve for the steady state level

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1. Solve for the steady state level of capital per worker as a function of & and s. 2. Solve for the steady state level of output per worker as a function of & and s. 3. What is the steady state growth rate of output per worker? 4. What is the steady state growth rate of output? 3 Technological Growth Suppose that production is given by Y = KI(AN): The savings rate is s = 0.16 and the rate of depreciation is 6 = 0.1. Suppose further that the number of workers grows at 2% per year and that the rate of technological progress is 4% per year. 1. Find the steady-state values of the the following variables: capital per effective worker, output per effective worker, the growth rate of output per effective worker, the growth rate of output per worker, and the growth rate of output. 2. Suppose that the rate of technological progress doubles to 8% per year. Recompute your answers to part 1). Explain. 3. Now suppose that rate of technological progress is still equal to 4% per year, but the number of workers now grows at 6%% per year. Recompute your answers to part 1). Are people better off in situation 1) or 3)? Explain.4. Suppose that the economy's production function is given by Y = K1/3N2/3 a. Is this production function characterized by constant returns to scale? Explain. b. Are there decreasing returns to capital? c. Are there decreasing returns to labor? d. Transform the production function into a relation between output per worker and capital per worker. e. For a given saving rate, s, and depreciation rate, 6, give an expression for capital per worker in the steady state. f. Give an expression for output per worker in the steady state. g. Solve for the steady-state level of output per worker when s = 0.32 and $ = 0.08. h. Suppose that the depreciation rate remains constant at 6 = 0.08, but the saving rate is reduced by half to s = 0.16. What is the new steady-state capital per worker and output per worker? i. Find the Golden Rule level of capital per worker, output per worker and consumption per worker when 6 =0.08? What level of s allows the economy to attain the Golden Rule level of consumption per worker?The Solow Model Consider an economy that follows the dynamic as in the Solow model developed in class, with constant population L. Suppose a country enacts a tax policy that discourages investment, and the policy reduces the investment rate immediately and permanently from s to $new (with Snew

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