Question
A neutral technological change
__________Solution
Impact of Neutral Technological Change:
- Output and Savings Curve:
- A neutral technological change increases the overall productivity, which means that for any given amount of capital and labor, the output produced is higher.
- This higher output increases the level of income, leading to higher savings if the savings rate remains constant.
- Therefore, the production function shifts upward, and consequently, the savings curve (which is derived from the output) also shifts upward.
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