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An economy has the following production function: Y = K1/2 (LE) 1/2 Some more additional details...

An economy has the following production function: Y = K1/2 (LE) 1/2 Some more additional details known about the economy: • The savings rate (s) is equal to 0.3. • The population growth rate (n) is equal to 0.02. • The rate of growth of technology (g) is 0.03. • Depreciation rate (δ) is at 0.05.

(e) Compute the steady state consumption before and after the transition. Do you see an improvement in consumption?

(f) Provide a graphical illustration to the transition of the economy from savings rate of 0.4 to 0.5.

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