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Consider the discrete-time Solow model. Production is given by Yt = KP ( At It ) 1-a, where Ke is capital, At is technology, and Lt is labor. Technology and labor grow according to At+1 = (1 + g) At, and Lt+1 = (1 + n)Lt.Capital is accumulated through I Kt+1 = j + (1 5)Kt, where q is a xed parameter that measures the price of investment goods in terms of consumption goods. Households save a constant rate of output 3. Hence It : 5Y2. K1: AtLt ' (1) Find a formula for the steadystate capital per efcient worker kt = (2) Explain how an increase in q affects the steadystate level of capital (per efcient worker) and output (per efcient worker). (3) (Harder you may approximate.) Suppose you run the following crosscountry regression: K- 10% (L) = a0 + a110g(3i) + \"2 10g (qi) + 5*" where s: is the savings rate of country i (measured as average I / Y, with both measured in units of consumption, as in the model) and qi is the price of investment goods in country 2'. Suppose the model is true, that all countries are in steadystate, and that both 3; and qi are uncorrelated with countrylevel TFP. What would you nd for Q1 and for (L2