(Solved): Can this be explained and answered. (Solow growth model.) Assume that output is generated by labo ...

Can this be explained and answered.

(Solow growth model.) Assume that output is generated by labour, $N$, and capital, $K$, and that productivity is labour augmenting and denoted by $A:Y=F(K,AN)$, where the production function has constant returns to scale and positive but diminishing marginal product of each factor of production. The variable $A$ measures the efficiency of workers in the production process - their abilities, training and effort. Capital depreciates at rate $?$, the population grows at rate $n$ and productivity grows at rate $g$. Assume a closed economy with full employment where the saving rate $s$ is exogenous. (a) Write a differential equation that shows the evolution of the capital stock (appropriately normalised) and solve the model graphically for a steady-state equilibrium $(25\%)$ (b) Show the effect of an increase in the saving rate $s$ on consumption, investment, the capital stock and output over time? (25\%) (c) Imagine that a virus starts spreading within the country that makes people afraid of leaving their homes for some time (not forever!). What is the effect on the capital stock, investment, consumption and output over time? (25\%) (d) Describe the effect of the disease on the economy if a fraction $d,(0<d<1)$, of the population dies during the epidemic but the survivors have the same rate of fertility as before. Describe the effect on investment, the capital stock, consumption and output over time. $(25\%)$