Question

Consider an economy described by the combined Solow and Romer model. If this economy is on its balanced growth path when an exogenous permanent increase in the depreciation rate occurs: Group of answer choices the level of output per capita on the new balanced growth path will remain unchanged the growth rate of output per capita will remain unchanged there will be an immediate growth effect the economy will not exhibit transition dynamics

Answer 1

there will be an immediate growth effect

Step-by-step explanation:

In the case of Solow model, if there is an increase in the growth rate of population so it improves the growth of the aggregate output but at the smae time there is no impact on growth of per capita production in the long term

Also, the level of per capita output of steady rate should declines when the growth rate of population increased

Therefore the above statement should be the answer