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Consider a Solow economy currently in the golden rule steady state with savings rate s and depreciation rate d. Suppose that the depreciation rate increased
Consider a Solow economy currently in the golden rule steady state with savings rate s and depreciation rate d. Suppose that the depreciation rate increased due to bad climate conditions. At the new steady state, the level of capital shock _______ and the level of consumption is ______.
A. higher; higher
B. higher; lower
C. lower; lower
D. lower; uncertain
E. lower; unchanged
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