1. Consider a Solow economy that is on its balanced growth path (at the steady state.)...

1. Consider a Solow economy that is on its balanced growth path (at the steady state.) Assume for simplicity that there is no technological progress. Now suppose that the rate of savings increases. a. What happens to the balanced-growth-path values of capital per worker, output per worker, and consumption per worker? Sketch the paths of these variables over time as the economy moves to its new balanced growth path. b. Describe the effect of the increase in savings rate on the path of total output over time.

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Rahul Sunny answered 5 days ago

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