= = 1 (Difference Equations) This question primarily evaluates your skills and techniques in difference equation methods. Consider a variation to the "baseline" Solow growth model with no population growth. The linear per-capita production function is given by Yt = 0.3kt + 0.8. The saving rate is s = 0.2 household saves a constant proportion of output every period, and the depreciation rate is d = 0.1 capital stock depreciates at constant rate every period. The per-capita capital accumulation equation is kt+1 = kt 0.1kt + 0.2[0.3kt + 0.8]. (a) (3 points) In words, interpret the per-capita capital accumulation equation given above. (b) (4 points) Solve for the steady-state level of capital, then find the steady-state level of output. (c) (5 points) Draw the phase diagram in (kt, kt+1)-space. Clearly denotes the steady state and the dynamics when ko