Question
Consider a Solow model where the production function no longer exhibits diminishing returns to capital accumulation. Assume that the production function is now Yt =
Consider a Solow model where the production function no longer exhibits diminishing returns to capital accumulation. Assume that the production function is nowYt=AKt. The rest of the model is unchanged.
a (5 points) Draw the Solow diagram in this case.
b (5 points) Suppose the economy begins with capitalK0, and show how the economy evolves over time in the Solow model.
c (5 points) What happens to the growth rate of per capita GDP over time?
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Intermediate Microeconomics
Authors: Hal R. Varian
9th edition
978-0393123975, 393123979, 393123960, 978-0393919677, 393919676, 978-0393123968
