2.) Consider an economy described by the following CobbDouglas, constant-returns-to-scale, aggregate production function:

Y (K, L) = ^. ^.

i.) Derive the per-capita/worker production function

ii.) Assume the depreciation rate () is 1.5 percent, the population growth (n) is 4 percent, and the savings rate (s) is 8 percent; derive the discrete fundamental Solow Growth equation, and finally find the steady-state capital stock per-capita/worker (k*) and output per-capita/worker (y*).

iii.) Assume the savings rate (s) rises to 16 percent, all else equal, recalculate steady-state per-capita/worker stock and output percapita/worker. Then explain the positive implications of an increase in the savings rate on the economy in the long-run