In the overlapping generations model, explain how saving responds to changes in the wage rate and the interest rate.
Question
Solution 1
In the Overlapping Generations Model (OLG), the response of saving to changes in the wage rate and the interest rate can be explained as follows:
- Wage Rate: The wage rate is the price of labor. In the OLG model, an increase in the wage rate would increase the income of the young generation who a Knowee AI is a powerful AI-powered study tool designed to help you to solve study problem.
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