Given that and(alpha) = 0.3, = 1, r* = 0.025, A*= 1, and L* = 0.5and no government spending

marks. Round any numerical results to 3 decimals.) Abstracting from long-run growth by setting 72 = g = 0 and from persistent shocks by setting pA = pa = 0, with [it E lnAt lnil and (it E lnGt Inf}, and normalizing the population to N = 1, the following nine equations describe the \"baseline\" BBC model in Chapter 5: Yt = Ct + It + Gt (1) Yt K? (14:14:) 1\" (2) Kt+1 = Kt + It 5K: (3) At = 6A; (4) Gt = EC; (5) rt = a(AtLt/K)1' a (6) 'wt (1 - a)(Kt/AtLt)aAt (7) 1 1 _ = 'PE [ 1 + ] 8 Ct '3 t Ct+1( n+1) ( ) Ct _ wt 1 Lt ' F (9) Again, for the special case of the model, what is the percentage change in output and percentage point change in the interest rate if the economy is at steady state at time t 1, but there is a shock EA; 2 0.2 (La, 20%) at time t? Explain the economic intuition behind the responses of output and the interest rate in terms of the marginal products of labour and capital. (Hint: note that the 6A,: = 0.2 shock is to lnAt, but the model solution is for the level of At. First solve for the steady-state level of output and then solve for output and the real interest rate given the shock.)