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?

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Total national savings St is equal to Here total pro... View the full answer