a) The shock is permanent.
b)The shock is temporary.
It is the classical model of economic growth based primarily on the work of Ramsey, with extensions provided by David Cass and Tjalling Koopmans.
a) The imperfect information will be done. Stability decreases and the resulting errors will be forecasted.
Thus, the shock is permanent
b) Response to error will be increased and process required to reduce errors will be followed by actual change in information.
Thus, the shock is temporary.
Learn more about standard ramsey model
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