2. Suppose an economy has a production function:

Y = 10(K)^.25(EL)^.75

where EL = "effective worker" units, and capital wears out an average of 10 years (i.e., = 0.1).Assume that population growth is 4%, the rate of technological growth is 2% and the saving rate is 0.128.

A)(2 points) Derive the equation for output per effective worker, where k equals the amount of capital per effective worker.

B)(4 points) Calculate the steady state levels for the following: capital per effective worker (k*), output per effective worker (y*), consumption per effective worker (c*) and savings per effective worker, sf(k).

C)(2 points) Using the data above, determine the steady state growth rate of output per effective worker (y) and the steady state growth rate of output per worker (Y/L).

D)(3 points) Given the data above, with all variables representing "per effective worker," this economy is currently producing where k*_current < k*_gold.What policy could be implemented to increase k* over time?How will this initially and in the long run affect consumption?No math is needed here - you can just answer this conceptually.