Problem
Consider an economy with constant employment and hours per worker normalized to 1.
(a) According the Solow Model, what is the relationship between future capital, current capital, and output?
(b) What is the relationship between the proportional growth in capital, total factor pro- ductivity, and capital per worker?
(c) Assume that TFP is constant. What is the steady state of the capital stock?
(d) Suppose that the labor share is 2/3, the savings rate is 10%, and the economy is in steady state. Suppose savings doubles to 20%. In the long run, what is the change in the log of the capital stock?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.