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Assume that in Country X, output is produced with labour and physical capital. The production function in per-worker terms is = 1/2. The depreciation rate

Assume that in Country X, output is produced with labour and physical capital.

The production function in per-worker terms is = 1/2.

The depreciation rate is 2%.

The investment rate is as determined as follows:

= 0.20 f 10

= 0.40 f > 10

Draw a well-labelled diagram showing the steady-state(s) of this model.

Calculate the values of any steady-state levels of k and y.

Also, indicate on the diagram and describe briefly, in words, how the levels of k and y behave outside the steady-state(s).

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