Assume that a countrys production function is Y = AK^0.2L^0.8. The capital-output ratio is 2.5, the growth rate of output is 2 percent, and the depreciation rate is 3 percent. Capital is paid its marginal product.

(a) If the economy is in a steady state, what must be the saving rate?

(b) If the economy decides to achieve the Golden Rule level of capital and actually reaches it, what will be the marginal product of capital?

(c) What must the saving rate be to achieve the Golden Rule level of capital? (Hint: the capital- output ratio is 4 at the Golden Rule steady state.)