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2. Use the Solow growth model of chapter 5 (no population growth, no change in A) and assume that a = 1/3. In other words

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2. Use the Solow growth model of chapter 5 (no population growth, no change in A) and assume that a = 1/3. In other words the production function is given by Y = HK1/3in3. There are two countries, 1 and 2. The only difference between them is that country 1 has a saving rate, 5'1 = 452. a. Show graphically how these economies differ in terms of K" and Y'. (10 points) b. Show algebraically how the capital stock, K ', and output, 1", in country 1 compares to the same variables in country 2. (10 points) {11 1 I II n- .1 1 lo I I I 1 I' 1-. 1 I 1

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