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Start from the Solow model. a) What determines a stationary equilibrium in the model and why does the economy converge towards precisely that equilibrium in
Start from the Solow model. a) What determines a stationary equilibrium in the model and why does the economy converge towards precisely that equilibrium in the long run? b) Assume that the savings ratio decreases. Illustrate and analyze the effect of this on GDP according to the model. c) How is consumption affected in the short and long term?
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