The savings rate and changes in the capital stock Suppose that in country \(X\), the savings rate slowly declines from \(12 \%\) in year to \(11 \%\) in year \(t+1\) and \(10 \%\) in year \(t+2\).

Suppose, moreover, that the depreciation rate, \(\delta\), is \(10 \%\).

a. Using the production function (11.9) given in the chapter, what happens to the steady-state levels of capital per worker and of output per worker overtime?

b. Due to technological progress, suppose that the depreciation rate were to increase to \(12 \%\) at time \(t\) (remaining stable afterwards). How would that affect the results of part (a)?

Equation 11.9

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N --(3) = N 8 (11.9)