Assume that Antigua and Bermuda are two Caribbean economies that have the same production function:

Y=F (K, EL) =6K^1/2(E*L)^1/2

Antigua has a 10% saving rate, 6% population growth rate, 4% technological growth rate and 5% depreciation rate, while Bermuda has a 20% saving rate, 5% population growth rate, 5% technological growth rate and 20% depreciation rate.

Antigua has a capital stock per effective worker that is initially twice as big as that of Bermuda, but neither is yet in a steady state.

a) Determine the production per effective worker for the countries.

b) Calculate the steady-state capital stock per effective worker for each country

(c)Calculate income per worker and consumption per effective worker for each country and determine which country has the higher income and consumption per effective worker.

(d)Use well labeled diagrams to illustrate the effects on per-worker capital stock over time when there is:

i) A permanent increase in saving rate in Antigua.

ii) A permanent decrease in population growth rate due to the current crisis in Bermuda