1. Presume that the economy has the following production function: Y/L = 8*(K/L) 0.5. Further suppose that s = 0.2, gL = 0.3, and δ = 0.1. What is the value of the steady state capital-to-labor ratio?
2. Presume the government passes a law requiring households to increase their saving rate by 10 percent. According to the Solow Growth Model, in the short run:
1. Output per worker remains constant
2. Output per worker grows more slowly
3. Output per worker grows more rapidly
4. Output per worker grows at the same rate as the labor force
5. None of the above.