Draw the new curves after the shock occured

Reference no: EM132200154

Question: Supose initially the economy stays at the steady state k*, y*, i*, c*. At time t0, an innovative recycling technology has been discovered so that the lifespan of most of the capital machines are increased. As a result, the depreciation rate Î´ decreased to Î´ 0

(a) Draw the General Solow Diagram before t0. Label each curve their associated function of kt.

(b) Locate the steady state of k*, y*, i*, c* on the Diagram.

(c) On the same diagram, draw the new curves after the shock occured at period t0. Label the new curves with a prime superscript on the top right corner.

(d) Locate the new steady state k*'

(e) Draw the time path of kt, yt, it, ct.

Reference no: EM132200154

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