Suppose now that total output is produced with the production function:Yt = AKt with A > 0.

The households are as in the previous question, but since labour does not enter into the production function, wages and hours worked are equal to zero for all t. Assume that (1 + A ) > 1

which is necessary to have positive growth, and

log ((1 + A )) < 1

which is necessary for the problem to be bounded.

(a) Find the growth rate for consumption.

(b) Explain whether the equilibrium of this model has a transition in consumption or whether consumption immediately jumps onto a balanced growth path.