As an economic aduisorto the Treasurer of country A, you are required to provide some assessment of the likely impact of an increase in the tax rate from its current level of 38%percent to a new proposed level of 45 percent. The first element of your analysis is the calibration of a theoretical model with the followingelements: Production Function: Y : AKMNI'GGHW Budget constraint: 6 : rY Physical capital accumulation: AK : g1 r)Y 6K Yisthe level of total GDP, K is the stock of physical capital, N is the stock \"W G is government expenditure, A denotes the level of technological efficiencye which is assu medto be constant. Your team of economic analysists provides the following information: o The rate of population growth in this country is zero and expected to remain at zerofor the longcterm I The saving rate (5) is 30% o The Labor stock is 300 units . The rate of capital depreciation (6) is 5% I The current level of technological efficiency is measured as 0.15 o The production function is Why a = 0.4 Using this information, you prepare your analysis ofthe relationship between tax rate andgrovvth rate of GDP perccapita: 3) Present and briefly comment a diagram representing the relationship between tax rate [displayed on the horizontal axis) and growth rate (displayed on the vertical axis), usingthe theoretical model and the information provided by yourteam of economic analysts. b) Based on the results from part a, predict the rate of growth ofthe economy ifthe tax rate is increased to 45%. Briefly explain the economics underlyingyour resuit. {1) Based on your analysis, and assuming that the goal of the Treasurer is to W growth, what is your advice: should the tax rate be increased or not? A member of your staff finds a very recent paper that present ern piricai estimates of therelationship between tax rate and growth rate based on a sample of countries similar tocou ntry A. The main result of the empirical estimates is reported inthe following table Variable in the regression equation Estimated coefficient "" means that the o-vaiue of the estimated coefficient is smaller tha n 0.01 Constant 8332*\" Tax rate 1012\"" Tax rate squared 44.31\"\" d) Do the empirical findings of this paper make you change your advice as towhether the tax rate should be increased or not? Briefly explain why