Question 1 Consider an economy that has the following production function: Y = zF(K, N) = K1/3N2/3 where Y, z,K and N denote output, total factor productivity, capital stock and labour employment respectively (2 = 1 for simplicity). Assume the depreciation rate d = 0.18, saving rate S = 0.2, and population growth rate 71 = 0.02. a) Write down the production function in per worker terms. (1 mark) h) Calculate capital, income and consumption per capita in the steady state. Use a diagram to illustrate your answer. (2 marks) c) The economy is initially in the steady state that you calculated in part (b). Now suppose that there is a surge in the saving rate such that S = 0.4. i) Calculate capital, income and consumption per capital in the new steady state. (1 mark)