Y6

PS3: Using well-labelled clear diagrams, explain the effect on steady-state equilibrium and growth in the Swan-Solow model of the following: (a) A reduction in the depreciation rate, 8 (2 marks) (b) A reduction in the saving rate, s (2 marks) (c) An increase in total factor productivity, A (2 marks) (d) What role does technological progress play in the Swan-Solow growth theory? (2 marks) (e) What are the limitations of the Swan-Solow model in explaining growth? (2 marks)