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Question

Suppose that you are provided with the following information about Country Hungry:

Variables.

Growth

real interest rate. 1%

population growth rate. 2%

• Pk = 1, and the profit function is as follows:

Π = − rK − wN − δ • Assume Cobb-Douglas framework and = 0.

• Question: Do you expect to see a pareto improvement? Why or why not?

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