Problem 3: Industry Policies (10 points) Consider the following model parameters (refer to the updated slides or paper) 0 0 0 D l 0 D 0 E: 02 0 0,13: 0, z: 1, D: x; 0 0, 00, anew =1nc(t)- (a) What type of technology progress doesA(t} capture? (1 points) (b) Prove that the steady state saving rates'" is strictly increasing ing. (3 points) ((2) Consider parameters (my, 5, o} = (001,0.10,0.05,0.50), and steady state saving rates\" = 1141]. H9 drops to 006, what will be the new steady state saving rate? (2 points) ((1) Right after an earthquake that destroys 1% of the capital stock in steady state with: 0.10, what will be the immediately change in saving rate according to this Ramsay model? (2 points) (a) Use this model to compare the different saving rates between US. and China. (2 points) Problem 5: Endogenous Growth (10 points} Replace capital externalities with production externalities. Consider the following functional forms K05} =F(K(t},Li(t},A(t}) =K(tl\"(A(t}Lar(tDl"\"> AU} =5 YUL a 6 (0,1), 5 ER), \"(C(13) = 111005}- (a) Solve the growth rate in social planner's problem. (2 points) (b) Find the range of such that the social planner optimally chooses a positive growth rate not violating the Transversality Condition. (2 points) (c) Solve the growth rate in competitive market. (4 points) (d) Is the coefcient}' necessary in the model? Why? (2 points)