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Now consider the basic Solow model covered in class. Assume that Country A has a production function as following. Y = AW? Where A represents
Now consider the basic Solow model covered in class. Assume that Country A has a production function as following. Y = AW? Where A represents the technology available in the country and K the aggregate capital. Let the national saving rate be equal to 30%, s = 0.3. Also, assume that capital depreciates at a constant rate of 3%, 6 = 0.03. 01.3 Now, let's get back to the situation where A=1. However, say that the depreciation rate has decreased to 0.02 from 0.03. Relative to the previous steady state level of capital and output, what will happen? Also, draw a graph
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