Please assist to solve the below question.Suppose an economy is on a balanced growth path in a simple Romer model, as described in thetext, where aggregate output is:Y, = A,Lyt,law of motion of ideas (idea production function) is:AA++1 = ZA“, Lat ;labour resource constraint is:Ly +Lat = L,and the allocation of labour is:La = IL,%3Dwhere z is a productivity parameter of the researchers, Ao is the existing stock of ideas attime, t = 0, L is the total population and assumed to be constant, and i is the constantfraction of population who works in the research sector.Suppose in year 2030, research productivity z rises immediately and permanently to thenew level z'.а.How would the growth rate of ideas behave if a <1?b.Assuming a = 1, solve for the new growth rate of knowledge and growth rate of output percapita.С.Assuming a = 1, sketch the graph of Iny against time t.d.Why might research productivity increase in an economy?

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a. How would the growth rate of ideas behave if a <1? b. Assuming a = 1, solve for the new growth rate of knowledge and growth rate of output per capita. C. Assuming a = 1, sketch the graph of Inyt against time t.

a. How would the growth rate of ideas behave if a <1? b. Assuming a = 1, solve for the new growth rate of knowledge and growth rate of output per capita. C. Assuming a = 1, sketch the graph of Inyt against time t.

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter17: Economic Growth: Resources, Technology, Ideas And Institutions

Section: Chapter Questions

Problem 3WNG

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