A.Government in the Solow growth model 1.Why is the equilibrium condition now sp + sg = I? We work with following assumptions: 1. Closed economy with national income accounts identity Y = C + I + G 2. All savings are invested Before the introduction of tax all of the consumer's savings represent the total Investment. The introduction of tax reduces the net income of the private sector and flows to the government. What is not spent by the government will …
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showed last 75 words of 1089 total
…state, the rate of growth of output per worker depends only on the rate of technological progress. Only technological progress can explain persistently rising living standards. So it is recommendable to provide foreign aid in form of technical assistance (technology trans-fer) rather than transferring money since the investment opportunities of the receiving countries may not be existing or the political environment may not allow to invest the money in the best way.