Compare the rate of economic growth at economys diff states

Reference no: EM13222538

Solow Growth Model. Suppose that the U.S. economy is initially at its steady state.

a. Use a Solow Growth Model diagram to clearly and accurately show the U.S. economy's initial economic situation. This diagram should be drawn in BLACK.

b. Provide an economic explanation of what you have shown in your diagram above.

c. The government now wants to undertake policies to increase the level of income-per-worker. After consultation with students taking Econ 100B at the University of California, Berkeley, President Obama has asked you to clearly and accurately show the effects on income-per-worker from providing large tax incentives (in RED) for research and development activities (in BLUE) that result in a large increase in exports (in GREEN).

d. Provide an economic explanation of EACH of the changes you have shown in your diagram above. Be sure to discuss any adjustment process that occurs during the transition period from the economy's initial steady state to its final steady state. This discussion should include what happens to the level of income-per-worker, the capital-to-labor ratio, the rate of economic growth both during the transition period and once the final steady state is achieved, as well as a comparison of the rate of economic growth at the economy's initial and final steady states.

Reference no: EM13222538

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