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4. Consider a closed economy with a per worker production function of y = k¹/4 where y is output per worker and k is capital per worker. Labor grows at a

rate of 2% per year, and the depreciation rate of physical capital is 12% per year. The saving rate in the economy is 28% per year. a. (8 Points) What are the steady state values of capital per worker, output per worker and consumption per worker? b. (6 Points) If the current level of capital per worker is k = 8, how will k evolve over time? Increase, decrease or remain unchanged? Explain the economic intuition behind your answer. c. (3 Points) What does the growth rate of capital per worker equal if k = 8?

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