Consider a closed economy in which the population grows at the rate of 1% per year. The per-worker production function is y = 6k^1/2, where y is output per worker and k is capital per worker. The depreciation rate of capital is 14% per year.

a.

Households consume 90% of income and save the remaining 10% of income.There is no government. What are the steady-state values of capital per worker,output per worker, consumption per worker, and investment per worker?

b.

Suppose that the country wants to increase its steady-state value of output per worker. What steady-state value of the capital-labor ratio is needed to double the steady-state value of output per capita? What fraction of income

would households have to save to achieve a steady-state level of output per worker that is twice as high as in Part (a)?