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(25 points) Suppose that in the Solow growth model the saving rate is 6 per- cent (8 = 0.06), population growth rate is 1 percent
(25 points) Suppose that in the Solow growth model the saving rate is 6 per- cent (8 = 0.06), population growth rate is 1 percent (n = 0.01), depreciation rate is 7 percent (d = 0.07), and production function is Y = >F(K, N) = K1/3/V2/3. Suppose that z = 3. (a) What is the steady state level of capital per worker and consumption per worker? (b) What is the level of golden rule savings rate and golden rule capital per worker? At the golden rule capital per worker, what is the level of consumption per worker?(c) Suppose there is a drop in z. Using a graph, show what happens to capital per capita in the new steady state. Moreover, explain what happens to the growth rate of aggregate GDP in the new steady state
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