Consider the Solow growth model in which population evolves according to:N= (1 +n)NwhereNis the population (labor force) in the current period,Nis the population (labor force) in the future period, andnis the population growth rate. There are public health expenditures that takes the form of government spending,G=gN, whereGis the current period government spending on health care,gis the per-capita health spending in the current period. The production technology is given byY=zKN1whereYis the output of the consumption good,zis the total factor productivity,Kis the current period capital stock, aNis the labour input, and 0< <1 is a parameter. Consumers save a constant fraction,s, of their disposable income, where 0< s <1.

1. (a)Suppose that the economic is hit by a pandemic (e.g. Covid-19). The government responds to the pandemic by raising the public health spending per person (e.g spending on vaccination)temporarily(i.e. one-period only). Using the Solow growth model, assess the impact of the pandemic.
2. (b)Suppose that the economic is hit by a pandemic (e.g. Covid-19) which causes atemporarydecrease in total factor productivity,z, as certain sectors in the economy (e.g. entertainment, travel etc.) cannot deliver the same quantity of output with physical distancing measures. In order to counteract the decrease inzdue to the pandemic, the government increasestemporarilyG(i.e. spending on vaccines) which eliminates the pandemic in the future period completely. Using the Solow growth model (i.e. equations, graphs, and words), discuss the changes in economic variables in both periods.