Answer Happy

In the Solow - Diamond model, the dynamics of the economy is characterized by the following equation: kt+1 = 1 B A(1 – a)ka, 1+n1+ B = = K where kt 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, L4+1 = (1 + n)Lt, ß L is the discount factor, B 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 1+B consumption is written as c = Akº – (n + d)k, where c is the steady-state per capita consumption, A is the productivity level, k is the per capita capital stock, S is the depreciation rate of capital, and n is the population growth rate. Use 1 a = 2 Žyp= B = 0.8, A = 18.9, n = 0.05, 8 = 0.1. = = Compute the Golden rule KGR. that maximizes the steady-state per capita consumption level. KGR is the per capita capital stock that maximizes the steady-state per capita.