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4. Consider a Slow model with an exogenous technology progress Of 270 (I.e., gA = 270) and We continue to assume a = 1/3. Suppose
4. Consider a Slow model with an exogenous technology progress Of 270 (I.e., gA = 270) and We continue to assume a = 1/3. Suppose an economy is initially in its steady state. Now the economy undertakes new policy reforms that permanently triples its investment rate, Sk. a. What is the growth rate for the economy in its initial steady state? b. What would be the growth rate for the economy in its new steady state? c. Find the ratio of current output per worker to the new steady state output per worker. d. Empirical work indicates that cutting output per worker in half relative to its steady state value raises growth rate by about 2% during the transitional path. In other words, if an economy is currently at 70% of its steady state, its growth rate would be raised by [(100%-70%)/50%]*2% = 1.2% during the transition period. Based on this, calculate the growth rate for this economy during the transitional path
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