Pls solve, as much as possible, I beg u
PART Solow Growth Model (35 points) Assume the production function for the economy is Y - K (EL) , the marginal propensity to consume is 90% the depreciation rate is 2%, the rate of technological progress is 1%, and the population growth rate is 2.5%. 1. Find the steady state capital stock (in per effective worker terms). Please round to the third decimal place (thousandths place). [5] 2. Compute the steady state output, consumption, and investment (using lower-case letters to denote per- effective worker terms). Please round to the third decimal place (thousandths place). [6] 3. Using the diagram below, illustrate the economy's steady state. Label the steady state point A. Clearly label the axes, curves, steady state Point A and equilibrium values (k*, y*, c+, and i*). You do not need to indicate the numerical values from #1-2. [5] 4. Define the golden rule in words (don't use symbols). [3] 5. Calculate the golden rule for this economy. [3] 6. Based on your answers above, is the value of k* that you calculated in #2 at the golden rule? [1] 7. Suppose the government imposes policies to achieve the golden rule. Illustrate how this affects the economy using the Solow growth diagram from #4. Illustrate new curves and new steady state (point B) Illustrate per-effective worker capital (k2*) and output (yz*) at the new steady state. [3] 8. Illustrate what happens to per-effective worker consumption (c) AND output per worker (Y/L) over time, assuming the savings rate is changed at time /* on separate diagrams [4] 9. How does the change you illustrates in #5 affect the following variables (increase, decrease, no change, or ambiguous): [5] a) Steady state output per effective worker b) Steady state living standards c) Steady state growth rate of output per effective worker d) Steady state growth rate of output per worker e) Steady state growth rate of output