Characterize the steady-state equilibrium

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Consider the discrete-time version of the neoclassical growth model. Suppose that the economy admits a representative household with log preferences (θ = 1 in terms of (8.49)) and the production function is Cobb-Douglas. Assume also that δ = 1, so that there is full depreciation. Characterize the steady-state equilibrium, and derive a difference equation that explicitly characterizes the behavior of capital stock away from the steady state.

Reference no: EM131139774

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