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One-time policy encouraging saving in time

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The economy starts below its steady state. Suppose the government decides to conduct a one-time policy encouraging saving in time 1. As in, the saving rate s will increase in time 1 and then fall back to its original level afterwards. No shocks happen ever since. Use a few sentences and/or graph to explain the shor-run and long-run impact of this one-time policy on (1) real output, and (2) economic growth or economic recovery.

Reference no: EM133311613

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