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Suppose a country decides to subsidize physical investment. Assume the policy increases the investment rate immediately and permanently from S to S'. Assuming the economy
Suppose a country decides to subsidize physical investment. Assume the policy increases the investment rate immediately and permanently from S to S'. Assuming the economy starts in its initial steady state, use the Solow-Swan model to explain what happens to the economy (i) over time and (ii) in the long-run. Draw a graph to help with your exposition.
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