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Consider theReal Intertemporal Modelstudied in class. Assume the domestic country receives some new machines from a foreign country which contribute to increase the current capitalK.
Consider theReal Intertemporal Modelstudied in class. Assume the domestic country receives some new machines from a foreign country which contribute to increase the current capitalK.
- How will this increase in capitalKaffect theNs,Nd,Ys, andYdcurves? Give the driver of each shift.
- Assuming the change inYsis in absolute value more important than the change inYd, what is the final impact on the equilibrium output, interest rate employment, the real wage, consumption, and investment? Explain your results.
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