Macroeconomic Theory II 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 lower in the future.(a) How does these affect the c˙ = 0 and k˙ = 0 (20%) (b) What are dynamics after time 0? (20%)
Macroeconomic Theory II 1. Consider a Ramsey economy that is on its balanced growth path. The level of government spending is G. Suppose that…