Question: Question 2 [50 points] Consider the following numerical example using the Solow growth model. Suppose that F(K, N) = 2K1/2N1/2 and d = 0.05, s
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Question 2 [50 points] Consider the following numerical example using the Solow growth model. Suppose that F(K, N) = 2K1/2N1/2 and d = 0.05, s = 0.2, n = 0.01, N0 = 1 and z : 2. The unit period is one year. 1. Find the steady state per-capita quantity of capital (113*), production (y*) and consumption ( (3*). [15 points] Now suppose that the economy is at its steady state in year 0. Let 3 increases from 0.2 to 0.6 at the end of year 0 (with still N0 = 1). 2. Fill the following table by nding the the per'capita quantity of the capital (19) production (3;) and consumption (C) for years 1, 2, 3, 4, and 5. [20 points] H) and 3. What are the new steady state percapita quantity of capital Us\"), production (3,: consumption (6\")? [10 points]
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