1. The Solow Model: Assume a production function of = . Also, assume that the depreciation rate is 2%, the savings rate is 20%, labor productivity is growing at 2% and population is growing at 1%.

a. Solve for the steady state level of capital per effective worker, the level of output per effective worker, and the level of consumption per effective worker. b. Assume that the economy is at the steady state. What is the growth rate of output per worker? Explain why. c. Assume the actual level of capital per effective worker is five units less than the steady state that you solved for in part "a." Will the growth rate of output per worker be at, above, or below the growth rate you answered in part "b"? d. Which economic concept is responsible for the growth in output per worker in part c? Explain the concept and how this concept related to the growth rate of output per capita.