Explain the central paradox at the heart of the Solow model, with constant and exogenous technologies. Given this paradox, why is the Solow model still relevant?
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Explain the central paradox at the heart of the Solow model, with constant and exogenous technologies. Given this paradox, why is the Solow model still relevant?
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- Assume the following scenario for a society: A terrible disease increases the mortality rate of women of childbearing age. Using (i) the Malthusian and (ii) Solow models (initially at steady- state), determine what the income per capita would be for each model in the short-run and in the long-run. Use graphical analyses as an aid in your explanation. Make sure to conclude your explanations with the differences in income per capita, if any, that are predicted by the two models for this scenario.Ricardo’s economic growth model can be recognized as an endogenous model. True or FalseConsider the path of output per person over time in the Romer model shown below, where the y-axis is the natural log of output per person (which is equivalent to using a ratio scale on the vertical axis). population Output per Person ideas efficiency parameter 3.5 3 2.5 0.5 O share of labor engaged in production saving rate O growth rate of the population 0 0 2 ——————- 4 Time At time t = 3, the change in the trajectory of this economy can be explained by a change in one of the parameters of the Romer model, namely an increase in 6 8 10 Pa
- Problem 1: Solow On a new sheet of paper show the work for each question. Suppose the economy of an island behaves as the Solow model, version 1.0 (constant population). The production function is Cobb-Douglas (with constant returns to scale) and the exponent on capital is 0.4. Further, the productivity parameter is 50 (A), the depreciation rate is 10% (d), the savings (investment) rate is 20% (s), and the labor force (L) is equal to 50 million (and constant over time). Suppose in year 2020 the economy is in a steady state. Compute the 2020 values for income per worker (Y/L) and the wage (w). Recall that the wage is given by the MPL. Pick the best choice from the options below. Per-worker income is higher than 520 and lower than 610. The wage coincides with per-worker income. Per-worker income is higher than 900 and lower than 1,150. The wage is between 610 and 660. Per-worker income is higher than 550 and lower than 820. The wage is between 420 and 490. Per-worker income is higher…Problem 1: Solow On a new sheet of paper show the work for each question. Suppose the economy of an island behaves as the Solow model, version 1.0 (constant population). The production function is Cobb-Douglas (with constant returns to scale) and the exponent on capital is 0.4. Further, the productivity parameter is 50 (A), the depreciation rate is 10% (d), the savings (investment) rate is 20% (s), and the labor force (L) is equal to 50 million (and constant over time).Based on two period model: population growth results in a decrease in the relative amount allocated to the second period and a lower present value of the marginal user cost. True or False?
- Given any two sequences and considering a similarity based cost model what can you say about which score, local similarity or global similarity, will be higher. justify.Romer’s (1986, 1990) approach to endogenous growth laid out a model which appeared to show that there were increasing returns to scale from technology and the accrual of savings to this technology. At a firm level, this seemed to imply that monopolies within a country would emerge. However, in reality, this is not the case. What is the reason that competition still survives in endogenous growth models (and, by extension, in reality)?What do economists mean by ceteris paribus? Why is ceteris paribus hard to engineer in practice? Discuss common hurdles
- what are the main empirical and theoretical contributions of the Mankiw, Romer and Weil's paper? Define one of the main empirical challenges they faced in their analysis?The Black Death: (a) Wages were higher after the Black Death because of diminishing returns. Our production model exhibits diminishing returns to labor: each additional unit of labor increases output by less and less. So if the amount of labor is reduced, the marginal product of labor — and hence the wage — increases. The reason is that capital stays the same: each remaining worker is able to work with more machines, so his productivity rises. In fourteenth-century Europe, the marginal workers could move to better land and discard old broken-down tools. Graphically, this can be seen by considering the supply-and-demand diagram for labor in Figure 4.2(b). If the supply of labor shifts back (because a large number of workers die), the equilibrium wage rate increases. Draw this graph — including the shift in the labor supply curve — to see the result for yourself. Mathematically, the result can be seen in the solution for the wage rate in our production model,…1- Equilibrium-defining equations in an IS-LM model are presented as follows: Y=C+I+G, C = C₁ + f(Y) = g(r), I = 1o — h(r), G = Go, and Mo = 3Y - i(r) where Co, Io, Go, Mo> 0 are exogenous variables, and f, g, h, i are continuously differentiable wwwwww and strictly increasing functions satisfying: Y = C₁ + f(Y) = g(r*) + Io − h(r) + Go Mo 3Yi(*). = for the unique equilibrium (rª,Y*). You should also assume that f' (Y) = (0, 1) (Why?). Find dr*/d Mo and dy* /d Go, and interpret your results.