Suppose that the population growth rate of a developing economy drops. Using carefully labeled diagrams explain what the effect is, in the neoclassical (Solow) growth model in both, (i) the short run, and (ii) the long run. What is the growth rate of aggregate capital in the original and new steady states as well as in the transition from one steady state to the other?

ENGR.ECONOMIC ANALYSIS
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8. Suppose that the population growth rate of a developing economy drops. Using carefully
labeled diagrams explain what the effect is, in the neoclassical (Solow) growth model
in both, (i) the short run, and (ii) the long run. What is the growth rate of aggregate
capital in the original and new steady states as well as in the transition from one steady
state to the other?
Transcribed Image Text:8. Suppose that the population growth rate of a developing economy drops. Using carefully labeled diagrams explain what the effect is, in the neoclassical (Solow) growth model in both, (i) the short run, and (ii) the long run. What is the growth rate of aggregate capital in the original and new steady states as well as in the transition from one steady state to the other?
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