Two questions:

1. Describe how, if at all, each of the following developments affects the production function, saving function, and replacement investment function in the Solow-Swan diagram and show the effect on capital-labour in steady state:

(a) The rate of depreciation falls.

*4. An economy described by the Solow-Swan model has the following production function: Y K 8 L where Y is aggregate output, K is capital and L is labour. Also, assume the saving rate is 0 = 0.3, population growth n = 3% and depreciation do = 3%. (a) Compute the steady-state values of capital-labour ratio, K/L, and output per worker, Y/L