Consider the following simple growth model:

4. Consider the following simple growth model: Y; = Kf'e\" K; = 31'; with (x E {0,1}. 3* > 0, 3 E (0,1). (a) Show that along a balanced growth path K and Y grow at the same rate g > 0. Compute g. (b) Dene the normalized variables: 3': = Elsegt kt = Kitegt and show that k; satises it = 5k? 9k