Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
expand_more
expand_more
format_list_bulleted
Question
Chapter 6.A, Problem 2E
To determine
Compare growth in the combined Solow–Romer model with growth in the Romer model.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Consider the following numerical examples for the Solow Growth Model:
Economy A
z=1
s=0.5
F(K,N)=K0.3N0.7
n=0.01
d=0.1
Economy B
z=1
s=0.2
F(K,N)=K0.3N0.7
n=0.01
d=0.1
In which economy is GDP per capita higher in steady state?
O Economy A
O Economy B
O Not enough Information
Consider the Swan-Solow model of economic growth. [Hint: Question (e) below goes beyond the subject matter discussed in the lecture and requires you to think independently.] a) Draw a suitable diagram with a typical Aggregate Production Function in it. b) Draw a typical Investment curve into the diagram. Briefly explain how you came up with the curve and what you need to know to exactly pin it down. c) Draw a typical Depreciation curve into the diagram. Briefly explain how you came up with the curve and what you need to know to exactly pin it down. d) Briefly define the steady state and show it in your diagram. e) It has been argued that corruption affects economic growth (e.g. Mankiw/Taylor, 5th ed., pp. 479-480). Explain which of the curves in your diagram is most plausibly affected by a reduction in corruption in an economy, and what this effect would be. f) Use your diagram to show how the effect that you have identified in part (e) affects the steady state in the model.
Consider the following numerical examples for the Solow Growth Model:
Economy A
z=1
s=0.5
F(K,N)=K0.3N0.7
n=0.01
d=0.1
Economy B
z=1
s=0.2
F(K,N)=K0.3N0.7
n=0.01
d=0.1
In which economy is Consumption per capita higher in steady state?
O Economy A
O Economy B
Not enough Information
Chapter 6 Solutions
Macroeconomics (Fourth Edition)
Knowledge Booster
Similar questions
- An increase in research productivity: Suppose the economy is on a balanced growth path in the Romer model, and then, in the year 2030, research productivity z̅ rises immediately and permanently to the new level z̅′. Solve for the new growth rate of knowledge and yt. Make a graph of yt over time using a ratio scale. Why might research productivity increase in an economy? I do not understand how to solve this, I'm confused. Am I supposed to make an equation or write out an answer?arrow_forwardIn class we assumed that the rate of population growth "n" was a constant. This was true for the Solow-Swan growth model as well as for the AK model. Imagine now that the rate of population growth is a function of k. Do you think fertility should be a function of k? An increasing or decreasing function of k? (Think of the costs and benefits of having children, and the reasons that lead people to purchase and produce kids) In the real world, do rich societies have larger or smaller fertility rates? Do you think mortality should be a function of k? An increasing or decreasing function of k? In the real world, do rich societies have larger or smaller mortality rates? Do you think net migration is a function of k? An increasing or decreasing function of k? In the real world, do rich societies tend to receive or to send migrants? а. b. C.arrow_forwardConsider the Solow Growth Model studied in Chapter 5 with the following information: The production function is: Y₁ = AK₁¹/³L2/3 Amount of labor (Lt) = 1000 Investment rate (s) = 0.1 Depreciation rate (d) = 0.4 Productivity (A) = 1 Find the numerical value of the steady-state level of output per person.arrow_forward
- Problem 2 In class we assumed that the rate of population growth "n" was a constant. This was true for the Solow-Swan growth model as well as for the AK model. Imagine now that the rate of population growth is a function of k. Do you think fertility should be a function of k? An increasing or decreasing function of k? (Think of the costs and benefits of having children, and the reasons that lead people to purchase and produce kids) In the real world, do rich а. societies have larger or smaller fertility rates? Do you think mortality should be a function of k? An increasing or decreasing function of k? In the real world, do rich b. societies have larger or smaller mortality rates? Do you think net migration is a function of k? An increasing or decreasing function of k? In the real world, do rich societies tend to receive or to send migrants? С. Imagine that n is a DECREASING function of k. Draw the savings and depreciation lines in the Solow-Swan models. d. In class we showed that, with…arrow_forwardThe economic growth model(s) of ( ) below can be recognized as an endogenous model. A Slow-Swan model; B Ricardo’s model; C Romer-Lucas model; D Harrod-Domar model; E Aghiot-Howitt model.arrow_forwardSuppose in a Solow model, we have the following parameter values: n = 0, s = 0.2, a = 0.33. There is no growth in the total factor productivity so that A, = A = 1. Moreover, we know that at time 0, the economy is at a steady state so that k = k, =1. Now imagine that a deadly pandemic hits the economy at time t=1. As a result, the population at time t =1 is 10% lower than the population at time t=0. The pandemic is a one-time shock so that population growth rate remains the same, i.e., from t-2 onward, the population remains the same as the population at time t=1. The total capital stock, however, is unchanged so that K, Ko. What is the growth rate of per-capita capital in percentage (rounded to the 2 decimal places, e.g., answer 1.08 if your calculation shows the growth rate is 0.01079) at time t=3 from time t=2? %3!arrow_forward
- please type the answer by computer, so i can see it clearly, thank you!!! Please answer in detail Determine whether the following statement is True, False, or Uncertain, and explain your answer. Statement: The Solow model suggests that economic growth is always and everywhere the result of sustained technological innovationarrow_forwardSuppose a Solow economy is initially at its steady state k∗, and suddenly is hit by a decrease in the depreciation rate δ, from δ to δ1. This change does not alter any of the other exogenous parameters in the model Depict this situation in a graph What happens to steady state level of capital per capita in this situation? What happens to the level of capital per capita over time? Depict this in a graph and explain intuitively.arrow_forwardWe have an innovation-based Schumpeterian model in which productivity and aggregate output growth are driven by product improvements, which are driven in turn by spending on Research and Development (R&D). However, as the economy becomes larger, and more technologically advanced, it becomes more complex.arrow_forward
- Question 4:a. Identify two assumptions of the basic Solow Growth Model. b. Why are these assumptions important in supporting the Solow Model? c. You are given the following information about an economy.Y = C + IY = F(K, L)The aggregate production function for this economy exhibits constant returns to scale and the marginal products of labor and capital are both subject to diminishing returns.s = saving rate (assume this is constant) per yearδ= depreciation rate (assume this is a constant) per yeary = Y/Lk = K/Lk* = steady state of capital per worker (K/L) and sf(k) < δk.i. What is sf(k)? ii. What is δk?iii. Interpret the meaning of sf(k) < δk? iv. Graphically illustrate sf(k), δk, and k*. Indicate on your graph where sf(k) < δk.v. Explain what happens in this economy when sf(k) < δk.arrow_forwardProduction function is given by Y = Ka(AN)'¯ª, where a=2/3. Initially, the saving rate was equal to s and the economy was in the steady state. Use the Solow growth model to answer the following questions. (Please fill in numbers; use a yomma as a decimal separator: 10,5) 1. In order to increase capital per unit of effective labor in the steady state by a factor of 27 (i.e. to make it 27 times larger), the rate of saving needs to increase by a factor of 2. In order to increase output per unit of effective labor in the steady state by a factor of 4 (i.e. to make it 4 times larger), the rate of saving needs to increase by a factor of 3. Suppose that s=25 percent, the rate of depreciation of capital is equal to 5 percent, the rate of technological progress is equal to 1 percent, and the rate of population growth is equal to 0,25 percent, a=2/3. The steady state level of investment per unit of effective labor is equal toarrow_forwardConsider the Swan-Solow model of economic growth. [Hint: Question (e) below goes beyond the subject matter discussed in the lecture and requires you to think independently.] a) Draw a suitable diagram with a typical Aggregate Production Function in it.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education