Consider a closed economy in which the population grows at the rate of 1% per year.

The pre-worker production function is y=6(k)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.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 part (a)?