Optimal Growth The model differs from the classic one sector optimal growth model by the assumptions on the preferences of the agents. The infinitely-lived representative agent has preferences given by =0 where 0 0 is a reference level of consumption that the agent compares herself to (this is called keeping up with the Jones'utility). The production technology is given by y = Ako, a (0.1) where ye is output per capita, k, is the capital per capita. Capital depreciates by 100% each period. Assume that there is no population growth and no exogenous technological change. 2. Characterize the optimal steady state(s). Determine how affects the steady state levels of consumption, capital, and output. Characterize how this model's dynamic behavior differ from the standard Cass-Koopmans model. Optimal Growth The model differs from the classic one sector optimal growth model by the assumptions on the preferences of the agents. The infinitely-lived representative agent has preferences given by =0 where 0 0 is a reference level of consumption that the agent compares herself to (this is called keeping up with the Jones'utility). The production technology is given by y = Ako, a (0.1) where ye is output per capita, k, is the capital per capita. Capital depreciates by 100% each period. Assume that there is no population growth and no exogenous technological change. 2. Characterize the optimal steady state(s). Determine how affects the steady state levels of consumption, capital, and output. Characterize how this model's dynamic behavior differ from the standard Cass-Koopmans model