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------------------------------------------------ 1. Using the Solow model, illustrate and explain a situation where an economy currently has too little capital per worker to achieve the Golden Rule steady-state level of capital per worker.

In the Solow model, the Golden Rule steady-state level of capital per worker occurs when an economy maximizes its long-run consumption per worker. If an economy currently has too little capital per worker to achieve this level.

it means that the capital stock is below the Golden Rule level. One possible situation where this can happen is when the saving rate is too low. The saving rate determines the amount of current output that is saved and added to the capital stock. If the saving rate is low, the capital stock grows slowly, resulting in insufficient capital per worker for reaching the Golden Rule level.

For example, if an economy has a low saving rate due to low investment levels or a lack of access to credit, the capital stock will not accumulate at a sufficient pace. As a result, the economy will operate below the Golden Rule steady state, leading to lower long-run consumption per worker.

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