Consider the Solow growth model. Suppose F(K,N) = zKaN1-a where a = 0.3. Also, assume that capital depreciation rate is

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Consider the Solow growth model. Suppose F(K,N) =
zKaN1-a
where a = 0.3. Also, assume that capital depreciation rate is
10% (that is d = 0.1), savings rate
is 25% (that is s = 0.25), populations growth rate is 2% (that
is n = 0.02), and z = 2.
First, determine capital per worker, income per capita, and
consumption per capita in the
steady state.
• Second, assume that the savings rate has increased to 40% but
the total factor productivity
decreases to 1. Discuss the effect of savings and productivity
on the steady state level of
consumption per worker.