Kindly discuss and explain in detail the following: What is the focus of Leontief paradox? How is it related to the production function? How does it affect economic growth modeling?
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Kindly discuss and explain in detail the following:
- What is the focus of Leontief paradox?
- How is it related to the production function?
- How does it affect
economic growth modeling?
Step by step
Solved in 2 steps
- One of the important lessons of production functions used in modeling macroeconomic output and growth is the Leontief paradox. Discuss what is this paradox, how did this arise, and its implications on modelling economic growth.The great 18th century economist Adam Smith wrote “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.” Explain how each of the three conditions Smith describes might promote long run economic growth.Suppose that , the marginal product of efficiency units of labor, increases in the endogenous growth model. What effects does this have on the rates of growth and the levels of human capital, consumption, and output? Explain your results.
- critically discuss the similarities and differences in growth factors based on Adam Smith's, David Ricardo's, and Harrod-Domar's theories.Consider the simple innovation model studied in class. In this model, the society allocates a fraction "gamma" of workforce to innovation and the remaining fraction to production. Suppose that, for simplicity, total workforce is normalized to unity: L = 1. If the productivity growth rate is defined by d A t/dt = "theta"* "gamma" * A_t and real GDP per worker by yt = At* (1 - "gamma"), what is the long-run growth rate of y_t?Explain the difference between the Big push theory by Rosenstein Rodan and the Hirschman theory of economic growth
- Which one of the following is the most accurate description of growth theory? A) Growth theory tries to predict long-run growth rates of actual economies. B) Growth theory studies only the proximate causes of growth such as capital and productivity. C) Growth theory tries to explain both the causes and consequences of economic growth in the long-run. D) The main objective of growth theory is to generate policy advise for governments.Identify a three public policies that can stipulate employment and facilitate economic growth in an economyAre Structuralists' approaches to economic growth consistent with the Harrod – Domar theories of growth? How do they differ in emphasis?
- Carefully explain the Solow Growth theory and its extended variations. That is, the basic Solow model and the model expanded to incorporate at least two other sources of economic growth.Consider the simple innovation model. In this model, the society allocates a fraction "gamma" of workforce to innovation and the remaining fraction to production. Suppose that, for simplicity, total workforce is normalized to unity: L = 1. If the productivity growth rate is defined by d A_t / d t = "theta" * "gamma" * A_t and real GDP per worker by y_t = A_t * ( 1 - "gamma" ), what is the long-run growth rate of y_t ?Why is a Cobb-Douglas production function useful for analyzing economic growth?
