A closed economy has the following Cobb-Douglas production function: y=k^(1/3)*L^(2/3) where Y denotes output, K denotes

[answerhappygod]

A closed economy has the following Cobb-Douglas production function: y=k^(1/3)*L^(2/3)
where Y denotes output, K denotes capital, and L denotes labor. Capital is measured in machines and labor is measured in workers. There is neither population growth, nor technological progress. The annual depreciation rate is 1.2%. The saving rate is 30%. There are 27 machines per worker at the beginning of the year.
(a) How much is consumption per worker during the year?
(b) How much is consumption per worker during the next year?
(c) How much is consumption per worker in the steady state?
(d) Now assume that the economy is already in its steady state.
(i) By how many percentage points should the government change the saving rate so that the economy may converge to the golden rule steady state (use a "+" for an increase and a "-" for a decrease)?
(ii) How would the current generation feel about such a change?
(iii) How much would be consumption per worker in the golden rule steady state?