Suppose that in the Solow growth model, the production function of a country is given as:

Y =zK0.5 NO.5.

The depreciation rate of capital is d = 0.09, population growth rate is n = 1%, and productivity is

z = 2.

1. What is the savings rate that would induce the maximum consumption per capita?
2. Suppose the current savings rate is s = 20%. What are the capital per worker k, output per worker y, and consumption per worker c in the steady state?
3. Suppose the economy in 2007 was in the steady state described in (b). The productivity decreased to z = 1 in 2008. Calculate k of 2007 and 2008.

4. Suppose that in the Solow growth model, the production function of a country is given as: Y = zKO'SNO'S. The depreciation rate of capital is d = 0.09, population growth rate is n = 1%, and productivity is z = 2. (a) What is the savings rate that would induce the maximum consumption per capita? (1)) Suppose the current savings rate is s = 20%. What are the capital per worker k, output per worker y, and consumption per worker c in the steady state? (c) Suppose the economy in 2007 was in the steady state described in (b). The productivity de- creased to z = 1 in 2008. Calculate k of 2007 and 2008