Suppose That Technological Change Is Not Labour-Augmenting,but Affects Only Capital

question 17

Essay

Suppose that technological change is not labour-augmenting,but affects only capital.Use the Solow growth model of Chapter 8 to graphically illustrate the impact of the slower rate of technological change that increases the rate at which capital wears out (the rate of depreciation increases)on the steady-state capital-labour ratio and the steady-state level of output per worker.Be sure to label the:
i.axes
ii.curves
iii.initial steady-state levels
iv.terminal steady-state levels
v.the direction curves shift.

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Definitions:

Loanable Funds

The money available for borrowing, which comes from savings and is demanded by borrowers for investment.

Usury Law

Legal regulations that cap the maximum interest rate that can be charged on loans, intended to protect consumers from excessively high rates.

Maximum Interest Rate

The highest rate of interest that can be charged on loans and credit products, often regulated by law to protect consumers from excessively high rates.

Federal Funds Rate

The interest rate that U.S. banks and other depository institutions charge one another on overnight loans made out of their excess reserves.