Suppose the level of technology is constant. Then it jumps to a new, higher constant level. a.
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Question:
Suppose the level of technology is constant. Then it jumps to a new, higher constant level.
a. How does this technological jump affect output per capital/person, holding the capital-labor ratio constant?
b. Show the new steady-state equilibrium. What has happened to per capital saving and the capital-labor ratio? What happens to output per capital?
c. Chart the time path of the adjustment to the new steady state. Does the investment ratio rise during transition? If so, is this effect temporary?
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