Consider the effects of an increase in the saving rate on the United States capital-labor ratio, according
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Consider the effects of an increase in the saving rate on the United States capital-labor ratio, according to the Solow model.
a) What would be the immediate effect of a saving rate increase on the capital-labor ratio? What would be the long-run effect?
b) Do you think it is beneficial to increase the saving rate? If so, by how much? (Would you save 95% of your income?)
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a In the Solow model an increase in the saving rate leads to an immediate increase in the capital st...View the full answer
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