Consider a numerical example using the Solow growth

model. Suppose that F (K; N) = K^0:5N^0:5

; with d = 0:07; s = 0:25; n = 0:02;

and z = 2.

a. Determine capital per worker, income per capita, and consumption per

capita in the steady state. (12 points)

b. Instead of part b of the question 7, Önd the golden rule quantity of capital

per worker. Is there overinvestment or underinvestment in this economy, relative

to golden rule? (13 points)

Consider a numerical example using the Solow growth

model. Suppose that F (K; N) = K^0:5N^0:5

; with d = 0:07; s = 0:25; n = 0:02;

and z = 2.

a. Determine capital per worker, income per capita, and consumption per

capita in the steady state. (12 points)

b. Instead of part b of the question 7, Önd the golden rule quantity of capital

per worker. Is there overinvestment or underinvestment in this economy, relative

to golden rule? (13 points)