B: The Solow growth model with effective labour and government spending Questions 21-25 relate to the following information. Consider the following production function: I = K? 14fo Gga where Y; denotes output, K; the capital stock, N; the labour input and A; is the technological progress variable. In this modelA; is labour augmenting because it affects aggregate output by increasing the effectiveness of labour. Note thatA;N; is commonly referred as "effective labour.\" G; is government spending, and it is included on the assumption that it makes private capital K; and N; more productive. Also, assume that the government runs a balanced budget, that is: Tf=Gf=TYt where T is a tax rate on output. Consumers save a constant fraction S of disposable income. The growth rates in N; and A; are equal to , and I'll, respectively. The depreciation rate equals d. Finally, the capital stock, K;, evolves according to: Kr+l = If + (1 (DE:- Question 21 (1 point) Ki Let yt = AN. and Kt = AN, .Also, the balanced budget can be written as gt = Ty in terms of effective labour. What is the intensive form of the production function in terms of effective labour? O yt = (kit) atB Oye = keg O 1 1-a-8 yt = k, atp O 1-a-8 yt = ki T atB