Question

Congress just passed close to a $500 billion increase in government spending:    

B. How will this impact U.S. national savings, investment, capital per worker, output per worker and the steady state in Solow’s Growth Model. Make sure to include an intuitive and graphical analysis as well as the policy recommendations in Solow’s growth model.

Answer 1

when there is an increment in government spending that had a +ve impact on saving means (Kindly refer to the graph)

saving increases from S1 to S2 where S2>S1

Investment increases from f1(k) to f2(k)

capital per worker increases from K1*to K2*

output also increases from K1* to K2*

so this initiative shows that to maintain a steady growth rate in the Solow model if the government will take progressive measure and labor protective measure in terms of enhancing their percapita will definitely give a growth the whole economy.