Consider an economy in which production is characterized by the neoclassical function Y K.5N.5 . Suppose, again, that it has a saving rate of .1, a population growth rate of .02, and an average depreciation rate of .03.
a. Write this production function in per capita form, and find the steady-state values of k and y.
b. At the steady-state value of k , is there more or less capital than at the golden-rule level?
c. Determine what saving rate would yield the golden-rule level of capital in this model.
d. In the context of this neoclassical growth model, can a country have too much saving?