Suppose an economy is described by the Solow model and output is produced using a CobbDouglas production function: Y; = K?(AtLt)l_a In per worker terms the production function can be written as: E = E a A10 L; L, '5 Assume that g = 0 and therefore A can be normalized to 1. Suppose the savings behavior is different from wh_at we assumed in class. In particular, below a minimum r3 level of output per worker, E peOple cannot save at all because all of the income is used for survival. Above this inco_me level, pe0ple are saving a constant fraction of additional income earned beyond Li: (a) Show what this means for the evolution of the capital stock per effective worker Y L_:' (b) Show graphically that in this economy it is (technically) possible to have one, two or three different steady states. For each of the steady states that you identify (in each of the three cases) briey discuss if the steady states are (locally) stable. if output is below Savings and capital accumulation 0 We assume that a constant fraction 3, 0