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)
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