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You are the chief economic advisor to a small Caribbean country with an aggregate per capita production function of y = 36%

Economics

You are the chief economic advisor to a small Caribbean country with an aggregate per capita production function of y = 36%. The savings rate is 6%, and the rate of depreciation is 10%. Population grows at a rate of 4%. There is no technological progress a. (3) On a graph, show the output, break-even investment, and savings functions for this economy (as a function of capital per worker). Denote steady-state capital per worker k* and steady-state output per worker y'. Label your graph completely for full credit. b. (2) Write down the equation used to solve for the steady state, and find the numerical values of this economy's steady-state levels of capital per worker and output per worker. (fractions or decimals are fine) C. (2) If capital per worker equals four units (k-4), explain in words how the economy works its way toward the steady state. d. (3) If k-4, write down the equations for and find the numerical values of: (1) investment per worker, (ii) break-even investment per worker; (ii) output per worker; and (iv) consumption per worker. Identify each of these on your graph (draw a new graph if necessary to see clearly).

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