In the Solow growth model, explin how the temporary rise in the saving rate would affect the consumption every employee in the long run.
Suppose that the economy starts in steady state. As per to the Solow growth model, describe how would each of the following affect consumption every employee in the long run assume that the growth model is AK?
a) A temporary rise I the saving rate.
b) A rise in government regulations whose net effect is to lower the marginal productivity of capital.