Please Explain

QUESTION 4 4 points Save Answer Consider a Solow model with the production function y= Ak) = y) k where n=0.03, and 5 = 0.07. The only missing piece that we need before we can nd the steady state is s, which we generally have assumed is fixed and exogenous. A major critique of the Solow model is that saving is a byproduct of choices about consumption so it should NOT be treated as exogenous. Maybe we can improve the Solow model by explicitly modeling consumption. Let's try it. i. Suppose C(k) = 0.6 + 0.51/ k. (What did we call the 0.5 in this equation in earlier chapters [e.g. Chapter 3]?). lfthere is no government and the economy is closed the accounting identity for output per worker is that y = C + i. Find an equation for the investment function, Kk)? ii. Find the non-zero steady state levels of k. There are two ofthem. (hint: the equation you get is nasty, so it might help to make a graph of the equations at a site like h_ttps://www.wolframalpha.com orjust use that website to solve your equation once you have it set up.) iii. 5 = i/y. Is the savings rate in this model an increasing or decreasing function ofthe capital-labor ratio? For the toolbar, press ALT+F10 (PC) or ALT+FN+F1O (Mac)