Consider the Solow growth model with a Cobb-Douglas production function with capital share , a constant savings rate s, a constant depreciation rate , and a constant population growth rate n (0 < s,,n < 1). Suppose equals 1/3, and TFP initially is A1 > 0.

Suppose that productivity increases by 10% to A2.

Question: In three separate figures, draw the evolution through time of productivity A, capital per capita Kit, and output per capita Yit. Make sure to include several periods of the pre-shock steady state, the time of the shock, the transition to the final steady state, and several periods of the final steady state. Discuss the differences between the two figures.