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Recall the math of the Solow model when productivity is constant and normalized to 1 for simplicity. The math reveals that in the steady state,
Recall the math of the Solow model when productivity is constant and normalized to 1 for simplicity. The math reveals that in the steady state, m _(s/[n+di)\"'\") s 9* (s/[n+d1)'\"1 6') n+d where the national rate of saving or investment is s, the population growth rate is n, the depreciation rate is d, and capital's share of income is a. To explain a sharp rise in a capital-output ratio, what are we looking for? In other words, how would each of these m parameters (3, n, d) need to change qualitatively on its own in order to generate what we saw in part 2? (There is no need for quantitative analysis yet.)
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