Determine the path followed by capital per worker

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Suppose in the Solow growth model that s = 0.25, n = 0.02, d = 0.08 and f(k) = k^0.3: 1. Suppose that z = 2. What is the steady state level of capital per worker and consumption per worker. 2. Now, suppose that initially z = 2 and the economy is in the steady state you calculated in part (1) . Then suppose z falls to 1.8 permanently. What is the new steady state? Determine capital per worker and output per worker in each of the first 10 periods after z falls. 3. Now, suppose that z = 2 initially, the economy is in a steady state, and then z falls to 1.8, but now for only 10 periods. Then, z = 2, forever. Determine the path followed by capital per worker and output per worker in the first 15 periods after z falls.

Reference no: EM13149864

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