Let kt denote the per-worker capital stock: kt = Kt=Lt. Suppose that the law of motion of kt is given by kt+1 = 3 + k1=2 a) Plot the diagram of kt+1 as a function of kt.

b) Calculate the steady state of the per-capita capital stock.

c) Per-capita output is given by yt =p kt. Suppose that there are two countries denoted by A and B. The two countries dier only by their initial capital stock. The initial per-capita capital stock for country A is kA0 = 1, while that for country B is kB0 = 10. Plot the two time paths for per-capita output of the two countries (i.e., time paths of yAt and yBt ).