Assume an economy without any technological progress. (5 points)
1. Using a Solow model with an alpha parameter of 0.5 determine the steady state amount of capital stock (K*), total output (Y*) and consumption (C*) when savings is 20%, population grows at a rate of 1% per year, and capital depreciates at a rate of 10% per year.
2. Repeat the exercise for a savings rate of 20% and depreciation rate of 10% but now assume that population grows at a rate of 4% per year. What do you observe as compared to your answers in part “a”? Are these results as expected? Explain