. Consider an economy with a Cobb-Douglas production function with = 1/3 that

begins in steady state with a growth rate of technological progress of g of 2 percent.

Consider what happens when g increases to 3 percent.

(a) What is the growth rate of output per worker before the change? What happens

to this growth rate in the long run?

(b) Perform a growth accounting exercise for the economy, decomposing the growth

rate in output per capita into components contributed by capital per capita growth

and technology growth. What is the contribution of the change in g to output

per capita growth according to this formula?

(c) In what sense is the growth accounting result in part b producing a misleading

picture of this experiment? Explain why this is the case.