10. What will be the growth rate of GDP per capita in 2018'? 11. How long will it take for the economy of Sto Lat to get within 0.1 of the steady state capital stock? 12. Once Sto Lat gets to its steady state, what will be the growth rate of GDP per capita? Suppose that Sto Lat has reached its steady state and it's been in it for a number of years, when suddenly one of the events listed below happens. For each one, use the Solow model diagram to show if and how the steady state will change. Use arrows on the horizontal axis (the K axis) to indicate how capital will adjust over time. Finally, plot the time path of total capital stock and GDP per capita from before the event. Be sure to describe the immediate (shortrun) eect and the longrun effect. You don't have to give numerical answers, a qualitative description will suice (this means identifying which variables will change and the direction of change but not necessarily telling me how much they will change). 1. The government introduces a tax on interest income, which discourages households from saving. As a result, the saving/investment rate drops perma- nently to 0.2. 2. Rising sea levels speed up the erosion of coastal areas, permanently in- creasing the rate of damage to roads, bridges, houses, hotels, and ports. No person is injured. As a result the depreciation rate rises permanently to 0.15. 3. Cheap one-way interstellar travel becomes a possibility, and half of Sto Lat's population leaves permanently for Mars. They do not take any capital with them. To answer the questions below, use any combination of the equations, graphs, and computer simulation of the Solow model we have discussed in class (the book as the rst two approaches but not the simulation). Suppose that the economy of Sto Lat behaves according to the Solow model. Its production function is wIH v-'IM y; =J1K; L. The exogenous parameters are: labor force 13 = 10, total factor productivity A = 2, depreciation rate d = 0.1, investment rate E = 0.3, and the capital stock at the beginning of 2018 was 73