Question
[O]n 1 March 2015, the South African Government introduced Tax-free Savings Accounts as an incentive for South Africans to save more, she said. With tax-free
"[O]n 1 March 2015, the South African Government introduced Tax-free Savings Accounts as an incentive for South Africans to save more," she said.
"With tax-free investments, investors are allowed to invest up to R33 000 per year with a lifetime limit of R500 000, taking advantage of the medium- to long-term benefits of compounding, without paying any tax on interest, dividends or capital gains tax (CGT).
"The additional tax savings these investments offer can also add up and compound over time."1"
Draw a well-labelled graph that illustrates the steady state of the Solow model with population growth (and depreciation), but with no technological change. Use the graph to explain what happens to steady-state capital per worker and income per worker in response to consumers opting to increase their savings rate due to the South African government introducing tax-free savings accounts. (5 marks)
[Ensure that you have labelled the axes, curves, initial steady-state levels, terminal steady-state levels and indicated the direction in which curves (if any) will shift.] (5 marks)
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