Values differ from the initial steady-state values

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Assume that the economy is initially in the steady state. Starting today the government implements a pay-as-you-go tax/transfer program whereby young people pay 2 units of goods to the government in each period to finance a payment of 2 units of goods to each old person in the same period. What is the capital-labour ratio and output level in the two periods after the change? How do these values differ from the initial steady-state values? Why?

Reference no: EM131236694

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