Consider a Ramsey economy that is on its balanced growth path. The level of government spending is G. Suppose that at time 0, the government goes into war and hence increases its spending.
1. Consider a Ramsey economy that is on its balanced growth path. The level of government spending is G. Suppose that at time 0, the government goes into war and hence increases its spending. Assume that this is an unanticipated shock. In response to this people anticipate that the rate of population growth will be […]