Imagine that one of the long-run effects of the current COVID-19 pandemic is to make people more… 1 answer below »

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Imagine that one of the long-run effects of the current

COVID-19 pandemic is to make people more conservative such that their

savings rates increase.

A. Using the Solow model, describe what the short and long-run impacts

of this change are? Does consumption go up or down in the short

and long-runs? What happens to the capital stock per person? What

happens to growth rate of output per capita in the short and long-runs?

B. Now assume that an additional effect of the pandemic is that the population growth rate also increases. How does this impact your previous

answer?

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