Describe the effects of permanent increase of foreign aid

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In the Solow model, describe the effects of a permanent increase of foreign aid. (a) What happens to output, saving, actual investment, and consumption in the short run? (b) Are the capital-laor ratio and the output per worker in the long run (the new steady state) higher or lower than the old steady state? (c) Describe the process of convergence from the old steady state to the new one.

Reference no: EM131172968

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