7. Numbers in the Romer model (II): Now suppose the parameters of the model take the followingvalues: A = 100,7 = 0.06, z=1/3000, and L = 1000.(a) What is the growth rate of output per person in this economy?(b) What is the initial level of output per person? What is the level output per person after 100 years?(c) Now consider the following changes one at a time: a doubling of the initial stock of knowledge Ao, adoubling of the research share I, a doubling of research productivity Z, and a doubling of the populationL. How would your answer to parts (a) and (b) change in each case?(d) If you could advocate one of the changes considered in part (c), which would you choose? Write aparagraph arguing for your choice.

The usual value of all goods and services that is produced in a country during a certain time period…

Answered: (a) What is the growth rate of output…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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2
1. Many endogenous growth models feature so called scale effects: per capita growth rises when population growth rises. Some economists have criticized these models for this reason, since countries with faster population growth do not in general appear to also experience faster per capita income growth. Consider an economy that has access to a production technology Y = AKª L¹-a where Y is output, A is the level of technology, K is capital and L is the amount of labor in the economy. Capital evolves according to K = SY (thus, the depreciation rate 6 = 0). The population growth rate is n. (Throughout, gx, where x can be any of the variables in the model). i. Assume that technology is determined by A =BK What sort of endogenous growth model is this? Find gk in terms of the K, L, and other parameters of the model. ii. Write an expression for gy in terms of gk and g₁. What must be true for a balanced growth path to exist in this model? Solve for the balanced growth path value of gy and gy,…

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