1. Byblostan economy has the following facts:

1. k = 1.5 y (the capital stock is about 1.5 times one years GDP)

2. d k = 0.15 y (about 15% of GDP is used to replace depreciating capital)

3. MPK k = 0.2 y (capital income is about 20% of GDP)

a. The administrators in Byblostan want to know how far their economy from the Golden Rule knowing that their real output growth rate is 4%.

b. Discuss only two policies that the government in Byblostan should adopt which may lead their economy reach the Golden rule in the long run.

2. Devoting a larger share of national output to investment would help restore rapid production growth and rising living standards Do you agree with this claim? Explain