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  3. 4. consider an economy at the steady state of the

4. Consider an economy at the steady state of the Solow growth model. (a) Many...

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Accounting

4. Consider an economy at the steady state of the Solow growth model. (a) Many machines in use in industry are expected to have a useful life of 10 to 30 years before needing to be replaced. Computers have a useful life more like 3 to 5 years before they need to be replaced. What does this imply about the depreciation rate of computers relative to other forms of capital? (b) As computers become a larger component of capital spending, how will this affect the Steady State of the economy? Draw a graph that captures the impact of the new depreciation rate on the economy. Place subscript 1 on all steady state variables associated with the old Steady State. Place a subscript 2 on all steady state variables associated with the new Steady State. Be sure to label which cures appropriately as well.

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