Imagine that one of the long-run effects of the wars currently going on around the world is to make people more conservative such that their savings rates increase. A. Using the Solow model, describe what the short and long-run impacts of this change are? Does consumption go up or down in the short and long-runs? What happens to the capital stock per person? What happens to the growth rate of output per capita in the short and long- runs? B. Now assume that an additional effect of these wars is that the popu- lation growth rate also increases. How does this impact your previous answer?

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