Consider an economy that is in the steady state of the Solow model. The government implements...

 

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Consider an economy that is in the steady state of the Solow model. The government implements a new policy that reduces incentives to save. The savings rate falls by 50% but the policy leaves the economy otherwise unchanged. a. What is the immediate impact on total output? What is the immediate impact on output per person? b. What happens to output per worker in the longer-run? c. What is the long-run impact on consumption per worker? Consider an economy that is in the steady state of the Solow model. The government implements a new policy that reduces incentives to save. The savings rate falls by 50% but the policy leaves the economy otherwise unchanged. a. What is the immediate impact on total output? What is the immediate impact on output per person? b. What happens to output per worker in the longer-run? c. What is the long-run impact on consumption per worker?

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a The immediate impact on total output would be a reduction in total output of 50 Output per person would also decrease by 50 b In the lo nger run o u... View the full answer