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Suppose that a country enacts a tax policy that discourages investment, and the policy reduces investment rate immediately and permanently from s to 5. Assuming

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Suppose that a country enacts a tax policy that discourages investment, and the policy reduces investment rate immediately and permanently from s to 5. Assuming the economy starts in its initial steady state, use the Solow model with no technological and no population growth to answer the following : (a) Graphically illustrate a decrease in s in the Solow diagram. (Make sure you label both arses, all lines/curves and show the old and new steady state levels on both asses). (b) Draw a convergence diagram that illustrates this decrease in the saving rate. (Put Yt on the vertical axis with a ratio scale (log) and time on the horizonal aa'is). (0) Explain in words what happens to the economic growth (i) over time and (ii) in the long run

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