Consider how unemployment would affect the Solow growth model. Suppose that output is produced according to the following production function:

= ((1 )) 1

where K is the aggregate capital stock, L is the size of the population, and u is the fraction of the people that is unemployed.1 In other words, the (1 ) expression represents the number of workers while L alone represents the number of people in total. The national saving rate is s, and capital depreciates or breaks at a rate just like in lecture.

a. What is the general equation from the basic Solow model that explains how capital changes?

k = [something, fill in this part]

b. What is the expression for the number of people who are actually working.

c. Define k as the amount of capital per worker. Find an expression for that. Define y as the amount of output per worker. It is a function of k. Find an expression for y.