The pandemic has caused many companies and individuals to increase investment in video conferencing technologies such as Zoom. This investment has increased the capital stock.

(a)Using the simple model of production, graph the effect of an increase in the capital stock on the real wage.

(b)Now using the Solow-Swan model, consider an increase in investment/saving (s ). What does such an increase imply for real wages in steady state? Explain your answer. (Hint: Think about how the Solow-Swan model and the simple model of production are related.)

(c)Using the Solow-Swan model, draw a picture of what the transition path of real wages would look like between the low investment rate steady state and the high investment rate steady state when s .