4. [22 points] Consider the extended Ramsey model with government as in Section 4.2 in the lecture notes. Suppose now the government expenditure, g = G/L, is in the form of providing public capital, which enhances the productivity of the private capital, k, so that = f(k,) where f1(k,ĝ) > 0 and f12 (k,ĝ)>0. (The rest of the model is the same as in the notes.) a) What would be the dynamic equations describing the equilibrium path of the economy? b) Analyze the effect of the government expenditure on the steady state ĉ and ✩ of the economy. Explain with diagram and intuition.

Definition Definition Structural system an enterprise uses to collect, store, report, retrieve, and process financial data. Accounting information systems are used by business analysts, auditors, accountants, and consultants for accurate and efficient access to financial data.

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