Question: Consider the following numerical example using the Solow growth model. Suppose thatF(K,N) =K1/2N1/2 andd=0.05,s=0.2,n=0.01,andz=1. Theunitperiodisoneyear. Findkthe steady state per-capita capital stock. Suppose that the economy

Consider the following numerical example using the Solow growth model. Suppose thatF(K,N) =K1/2N1/2

andd=0.05,s=0.2,n=0.01,andz=1. Theunitperiodisoneyear.

  1. Findkthe steady state per-capita capital stock.
  2. Suppose that the economy is at its steady state in year 0. Letzincrease from 1 to 1.1 at the end of year 0. Determine theaggregate quantitiesof the capital stock, consumption and output for years 1, 2 and 3 (i.e.,K, CandY). Summarize your results using a table.
  3. Give the golden rule level of capitalk.
  4. Find the highest level of consumption per capitalc.

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