Consider a Solow economy that is on its balanced growth path. Assume for simplicity that there is no technological progress. Now suppose that the rate of population growth falls.
- What happens to the balanced-growth-path values of capital per worker, output per worker, and consumption per worker? Sketch the paths of these variables as the economy moves to its new balanced growth path.
- Describe the effect of the fall in population growth on the path of output (that is, total output, not output per worker)
