An economy is in a steady state with no productivity change. Because of an increase in acid rain, the rate of capital depreciation rises permanently.
a. According to the neoclassical growth model, what are the effects on steady-state capital per worker, output per worker, consumption per worker, and the long-run growth rate of the total capital stock?
b. In an endogenous growth model, what are the effects on the growth rates of output, capital, and consumption of an increase in the depreciation rate of capital?