Reference no: EM132476469

a) Although ROLLINS is rich in natural resource such as copper, titanium and platinum, its environmental pollution has accelerated the depreciation of both its human and physical capital. Explain with a graph as an aid how this environmental pollution impacts output per worker, f(k); saving per worker, sf(k) and investment per worker (n+d)k. Also, explain how this environmental pollution will impact the country's saving and investment relationship as well as the economy's eventual steady equilibrium assuming Rollins is a closed economy. Assume that environmental pollution increases the per capita investment requirements per unit of output while having no impact of sf(k).

b) Now using the above information about ROLLINS environmental pollution explain verbally and graphically how the economy will restore its steady-state equilibrium in an open economy where ROLLINS has access to foreign direct investment focused on expertise in environmental pollution solutions and expanding the level of capital formation focused on production of environmental pollution hardware not available presently in ROLLINS'economy. An influx of foreign capital also becomes an alternative option for addressing the imbalance in savings and investment caused by this increase in environmental pollution.