5. Illustrate graphically what would happen with output per worker, consumption per worker, and investment per worker during the transition from a higher level of steadystate capital per worker to the Golden Rule level of capital per worker. What happens with consumption per worker?

a. Consumption will increase on impact, and then will expand exponentially.

b. Consumption will decrease on impact, and then will decrease slowly to a level above the initial level.

c. Consumption will increase on impact, and then will decrease slowly to a level above the initial level.

d. Consumption will decrease on impact, and then will continue to decrease slowly until it reaches a level above the initial level.

6. Suppose that two countries are exactly alike in every respect except that the populations grows in Country A at 3% each year (Na = 0.03) while the population in Country B grows 1% each year (Nb = 0.01). In which country will the capital stock per worker be larger? Illustrate graphically.

a. Neither country will grow, because they are in steady state. b. Country A

c. Country B

d. Both countries will grow at 5%.

7. In which country will the Golden rule level of capital per worker be higher? Illustrate graphically.

a. Both countries will grow at 5%.

b. Neither country will grow, because they are in steady state.

c. Country A

d. Country B

8. Which country will have the faster growth of output per worker in steady state?

a. Country A

b. Country B

c. Both countries will grow at 5%.

d. Neither country will grow, because they are in steady state