Solution Question 2 i) The resource constrain in level terms Ct+It Yt ii) The model in per worker terms Yt=Kt0.5 Yt/Lt= (Kt0.5)/Lt…

Solution Question 2 i) The resource constrain in level terms Ct+It Yt ii) The model in per worker terms Yt=Kt0.5 Yt/Lt= (Kt0.5)/Lt…

SolutionQuestion 2i) The resource constrain in level termsCt+It _ Ytii) The model in per worker termsYt=Kt0.5Lt0.5Yt/Lt= (Kt0.5Lt0.5)/LtYt/Lt={Kt0.5/Lt0.5,Lt0.5/Lt0.5}=  yt = (kt0.510.5).yt =f(kt0.5)iii).the steady state of the economysteady state capital stock per worker.f{k}=YtI=f{yt}=s_k=sf{kt}-{_+1}ktAt steady state _k=0 hence,Sf{kt__}={_+1}ktSteady state output per workeryt_/kt_=s(k)=_+1yt_/kt_= f(kt_)=(_+1)/siv).golden rule level of capital stockc_=f(k_)-(_+1)k_c_=(sf(k)-_+1)_v). if y=1/3 and economy is at steady state the golden rule would be.C_=sf{kt}-{_+1}ktc_={1/3(k)+_+1}ktHigher level of capital will result to higher level of output which result to higher consumption in the shortrun. Higher level of capital in the longrun leads to increase in output but does not lead to increase in consumption. Vice versa is also true.Question 3 has been attached below, solve question 3 in details

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