Short Question 3: (30 points) This question is about the Solow growth model from Chapter 5. Consider a countries Am- brosia and Burunda. Ambrosia's GDP per worker is 1.96 times that of Burunda. The ratio of investment to output is 0.35 in Ambrosia, and in Burunda it is 0.25. Labour supply is constant over time in both countries. So is total factor productivity (TFP). Assume both countries are in their respective steady states. Suppose output in each country i = A, B is produced according to Yit = A; KAL)- where Ya is output for country i at time t, A; is TFP for country i, Kit is capital stock in country i at time t, and L, is labor in country i. Capital is accumulated according to Kit+1 = s, Yit - dKit (1) Assume that the depreciation rate and the capital share are same across two countries. (e) The Consumption in economy B is given by: CBt = YBI - SBY BL, Using the Solow diagram and the equation for consumption, explain what happens to consumption over time after country B increases its savings rate. Does this policy unambiguously improve consumption? (5 points)