An economy is in a steady state with no productivity change


An economy is in a steady state with no productivity change. Because of an increase in acid rain, the rate of capital depreciation rises permanently. a. According to the Solow growth model, what are the effects on steady-state capital per worker, output per worker, consumption per worker, and the long-run growth rate of the total capital stock? Assume that the initial capital-labor ratio is not so high that is less than the Golden Rule level. b. In an endogenous growth model, what are the effects on the growth rate of output, capital, and consumption?

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