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The production technology of an economy is given by
a. Verify that the equilibrium wage rate must be and the interest rate
b. Show that capital market equilibrium in a steady state requires x1 = [1- α]kα – [1 + n]k.
c. Hence use the consumer’s budget constraint to show that x2 = [1 + n]k[1 + αkα-1].
d. Use these relationships to calculate the consumption possibility frontier. Sketch this frontier and locate the Golden Rule capital–labor ratio.