A2: Consider the neoclassical growth model with technical change in the diagram below. Suppose subtropic countries see their machinery depreciate faster as a result of a change in global climate. That is, d'>d. Recall, that this model assumes that technical change (A) is exogenous and growing at a fixed rate g.

output per. effective worker (y* ) u' in + g +d ) sf (u ") - - capital per effective worker (h* )