Question: Suppose the TFP parameter, , increases permanently. (a) What happens to the desired capital stock? (b) What happens to investment? (c) Hard: What happens to

Suppose the TFP parameter, Ā, increases permanently.
(a) What happens to the desired capital stock?
(b) What happens to investment?
(c) Hard: What happens to the investment rate in the long run? Why?

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