I would like you to simulate a Solow Growth Model in an Excel spreadsheet as follows.

1. Set up the parameters of the model: In a box on your excel sheet, set input the following numbers as values for each parameter. We will assume a Cobb-Douglas production function Yt =At Kt^? Lt^(1??)

a. Set capital's share of income ? = 0.5

b. Set the saving rate s = 0.5

c. Set the depreciation rate ? = 0.05

d. Set the population growth rate ? = 0.05

e. Set the technology growth rate ? = 0.04. Calculate ? (tilde) using your values for ? and ?.

5. Using the growth rates you set in part 1, use an Excel formula to calculate A\" and L for 100 periods (so you should have 100 rows filled in with these values) 6. Using the law of motion for capital per effective worker, calculate 7:: for 100 periods 7. Calculate values for the other 8 variables for 100 periods (carrying formulas down). 8. From the 100 values you have generated, create graphs of a) b) C) d) Capital per effective worker (include a dashed line at the steady state level of capital that you calculated in 2) The natural log of capital per worker The natural log of aggregate capital The growth rate of capital per worker and aggregate capital (you can use the difference in the logs as an approximation for the growth rate) 9. Copy the spreadsheet you have created into a new sheet. After period 100, change the saving rate to the value that optimizes steady state consumption (if you are already at this value, choose an arbitrary new value between 0 and 1). Using the new saving rate, starting in period 100, calculate values for all of your variables for 100 more periods (so you will now have 200 total values for each variable). Create a graph for the following variables (for these graphs, start from period 50, so you will plot t=50 to t=200). For each graph, include a dashed line at both the original and new steady state values (calculate these by hand) a) b) 0) Capital per effective worker Output per effective worker Consumption per effective worker 10. Copy the original spreadsheet again onto a third sheet. Now double )7. Using the new growth rate, starting in period 100 calculate values for all of your variables fonrvard to period 200. Create graphs (again starting in period 50) for a) b) C) d) Output per effective worker nclude dashed lines at both the original and new steady states)) The natural log of output per worker The natural log of aggregate output The growth rate of output per worker and aggregate output (again using the difference in logs) 2. Calculate steady state capital per effective worker, output per effective worker, and consumption per effective worker by hand. 3. Set the initial level of technology A0 = 1 and L0 = 1,000. Set IE0 equal to half its steady state value that you calculated in 2. Put these three values in the first row of three separate columns in your spreadsheet. 4. Using Excel formulas (i.e. not calculating by hand), calculate 330, 50, k0, yo, co, K0 Y0, and C0 putting each in the first row of their own column in your spreadsheet (you should now have 11~columns filled in total). You should be able to calculate all of these variables using k, A, L, and parameters