Question 4: The Neoclassical Economy Use the following information on a hypothetical economy to answer the following questions. Assume the economy behaves according to (1) the quantity theory of money (and the Fisher effect), (2) the Solow growth model with technological progress and population growth. In your answers, please cite which pieces of information (i-viii) you are using to answer the question, and clearly show your work. i. The capital stock is 3 times GDP. ii. Depreciation accounts for 8% of GDP. iii. Payments to labor account for 65% of GDP. iv. The population growth rate is 2% each year. v. The inflation rate is 4%. vi. The real interest rate is 2.5% vii. Households consume 75% of income. viii. Real GDP is growing at a rate of 4% each year. a) Write out an expression for the production function, Y = F(K, EL), assuming a Cobb-Douglas production function (you can use decimals instead of fractions). b) Compute the growth rate of output per worker. c) Compute the depreciation rate in this economy. Compute the nominal interest rate. e) Compute the growth rate of the money supply. f) Suppose the money supply growth rate rises by 2.5 percentage points. How will this affect the following variables: nominal interest rate and real interest rate. Explain why given the assumptions given above