In a Solow-type economy, total national saving, St, is St = sYt - hKt. The extra term,
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In a Solow-type economy, total national saving, St, is St = sYt - hKt. The extra term, -hKt, reflects the idea that when wealth (as measured by the capital stock) is higher, saving is lower. (Wealthier people have less need to save for the future.) Find the steady state values of per worker capital, output, and consumption. What is the effect on the steady state of an increase in h?
Related Book For
Macroeconomics Principles and Applications
ISBN: 978-1111822354
6th edition
Authors: Robert E. Hall, Marc Lieberman
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