Exercise 2 Suppose that the economy's production function is given by Y=K°(AN)2a where Y is output, K is physical capital, and AN is effective labor. Assume a=0.5 a. Suppose that the savings rate is equal to 25%, and that the rate of depreciation is equal to 10%. Suppose further that the number of workers grows at 2% per year and that the rate of technological progress is 1% per year. Find the steady-state values of: i. The capital stock per effective worker Output per effective worker The growth rate of capital per effective worker i. i. The growth rate of capital per worker The growth rate of capital iv. V. b. What is the saving rate that would maximize steady-state consumption per effective worker? Re-do item (a), assuming savings rate is equal to 25%, depreciation rate is 10%, rate of technological progress is 1%, but the number of workers grows instead at 4% per year. Are people better off in (a) or in (c)? Explain. С.