Answer Happy

In the Solow - Diamond model, the dynamics of the economy is characterized by the following equation: 12 kiti A(1 - a)k 1+1+1 where k, = ķis per capita capital stock at date t, K, is the aggregate capital stock, L, is the size of the population and grows at the rate of 1, L2+1 = (1 + n)L, Ø is the discount factor. 14is the saving rate. A is the productivity of the economy, 1 - a is labor share, and a is capital share. The steady-state per capita consumption is written as c = Ak" - (n + 8), where c is the steady-state per capita consumption, A is the productivity level, k is the per capita capital stock, 8 is the depreciation rate of capital, and n is the population growth rate. Use a= =0.8. A = 18.9.n=0.05,8 = 0.1. Compute the growth rate of the aggregate capital stock, K+1-K K in steady state where K, is the stock of capital at time and K 41 is the stock of capital at time + 1