Answer Happy

In the Solow - Diamond model, the dynamics of the economy is characterized by the following equation: 1 B ki+1 A(1 - a)k, 1 +11+B where k, = is 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 n, L:+1 = (1 + n)L., B is the discount factor, 14, is 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, in is the population growth rate. Use a= 2 5.0 = 0.8, A = 18.9,1 = 0.05, 8 = 0.1. Compute the Golden rule GR that maximizes the steady-state per capita consumption level. koR is the per capita capital stock that maximizes the steady-state per capita.