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Suppose we're modeling an economy using the Solow model. It begins in steady state. By what proportion does y? (the post-change steady-state per capita GDP) change in response to the following changes? Show your work/reasoning (a solution for y? will be a useful starting point).
(a) The investment rate doubles?
(b) The depreciation rate falls by 15%
(c) Productivity rises by 15%
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The following Table summarizes the profits of two firms as a function of their capacity investments levels (you can also interpret these levels as the quantities they produce):
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Supply of labor, L S (W/P), depends positively on real wages in classical model. It isn't always clear which individuals are included in the labor supply. Labor supply may consist
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