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Suppose we started out at the steady state capital stock in the basic Solow growth model. If the government increased the budget deficit (ceteris paribus)
Suppose we started out at the steady state capital stock in the basic Solow growth model. If the government increased the budget deficit (ceteris paribus) increasing government spending to create an decrease in the supply of loanable funds to the business sector (and no shift in the demand for loanable funds), then we would expect to see economic growth rates a. turn positive as we move toward the new steady state and the nation's capital stock to grow. b. turn negative as we move toward the new steady state and the nation's capital stock to grow. c. turn positive as we move toward the new steady state and the nation's capital stock to decrease. d. turn negative as we move toward the new steady state and the nation's capital stock to decrease. e. stay the same as we move toward the new steady state and the nation's capital stock to grow
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