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Free-Response #2: In the nation of Zamunda, the aggregate production function is given by the equation: Y=K(1/4)(LE)(3/4). While the current savings rate is 30%, capital

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Free-Response #2: In the nation of Zamunda, the aggregate production function is given by the equation: Y=K(1/4)(LE)(3/4). While the current savings rate is 30%, capital depreciates at a rate of 35%, population growth is 4%, and technological growth is 1%. a) (3 points) Find the steady-state levels of capital per effective worker, output per effective worker, and consumption per effective worker. Show all work. (Round answers to two decimals, if necessary) b) (4 points) Calculate the Golden Rule level of capital per effective worker. What optimal savings rate is necessary to achieve the Golden Rule equilibrium? Show all work. (Round answers to two decimals, if necessary) c) (3 points) Discussing the economy at town hall with voting constituents, a politician recalls from their undergraduate economics course that a way to stimulate growth with a current steady-state capital stock below the golden rule level is to increase the savings rate. Comment on the politician's logic and why some constituents might be against this policy change. Justify your thoughts

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