Assume that a country's production function is Y = AK0.2 L0.8.The ratio of capital to output is 2, the growth rate of output is4% and the depreciation rate of capital is 8%. Capital is paid itsmarginal product. Show all calculation where used.
a. What is the marginal product of capital inthis situation?
b. If the economy is in steady state, what mustbe the saving rule?
c. If the economy wishes to achieve the GoldenRule level of capital and actually achieves it, what will be the marginal product ofcapital?
d. What must the saving rate be to achieve theGolden Rule level of capital?