Consider the Bennpa economy that is described by the production function: Y = AK^0.25L^0.75.

Assume that the population growth rate is 3%, the technology index is constant at 50, the depreciation rate is 15%, and the saving rate is 20%. Suppose also that capital per worker is $150 in the current period (period 1).

a)Given the information above complete the following table:

Period in 1,2,3,4,T get Capital* K , output y , Consumption c , Investment i , Break-even Investment iBE, Change in capital k

1

2

3

4

...

T

* -----All variables in the table are in per-worker terms.

T----- Any period where the economy is at its steady state.

b)With the aid of a carefully labeled diagram, explain how the Bennpa economy would move to its steady state if the economy started with a capital per-worker of $300.