Question

1. A country is described by the Solow model with a production function of y=k^(1/2). Suppose that k is equal to 400. The fraction of output invested is 50%. The depreciation rate is 5%.
   1. What is the golden level of capital, what is consumption at the golden level of k, and what would the savings rate have to be so that k remains at the golden level?
   2. What is steady-state consumption per worker if the savings rate is 10% higher? 10% lower?

Answer 1