Suppose an economy begins in steady state and is characterized by the following parameter values: =

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Suppose an economy begins in steady state and is characterized by the following parameter values:  = 0.2,  = 0.1, Ā = 1,  = 100. Apply your answer to question 8 to calculate the growth of per capita GDP in the period immediately after each of the changes listed below. (Since the economy begins in steady state, its growth rate is initially zero and Kt = K*.)
(a) The investment rate doubles.
(b) The productivity level rises by 10%.
(c) An earthquake destroys 75% of the capital stock.
(d) A more generous immigration policy leads the population to double.
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Macroeconomics

ISBN: 978-0393923902

3rd edition

Authors: Charles I. Jones

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