20. Consider the Solow growth model where we add government purchases, G. According to the expenditure approach of GDP,

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20 Consider The Solow Growth Model Where We Add Government Purchases G According To The Expenditure Approach Of Gdp 1 (19.42 KiB) Viewed 11 times

20. Consider the Solow growth model where we add government purchases, G. According to the expenditure approach of GDP, Y=C+I+G. Suppose G = gY, where g is a number between 0 and 1. Government purchases are financed with taxes, T = G. Agents invest a fraction 5 of their disposable income, Y-T. Formally, I = 5(Y-T). The steady-state capital per worker, k = K/L, solves: sgf (k)= dk d. s(1-d)f(k) = ġk sdf (k) = gk e. a. b. C. s(1-g)f(k)= dk sf (k) = gk