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4.
The Solow growth model differs from the Harrod-Domar because:
a.
Assumes that
b.
Assumes that the rate of technological progress varies from country to country.
c.
Predicts that permanent growth is achievable only through technological progress
d.
Predicts that poorer countries will grow faster than richer countries.
Step by step
Solved in 2 steps
- What are the advantages of backwardness for economic growth?1. Carefully draw a graph depicting steady state conditions within the Solow Growth Model framework. Carefully explain, making reference to depreciation rates and savings rates, how the steady state level of capital is determined. Now, demonstrate how the economy can grow from this point forward (in separate analyses) assuming: (a.) widespread improvements in production technology, and (b.) increases in savings rates. For each analysis show and carefully describe how the new steady state level of capital is attained.(a) Two countries, Country A and Country B, are described by the Solow growth model. Bothcountries are identical, except that the rate of labor-augmenting technological progress ishigher in A than in B.i. In which country is the steady-state growth rate of output per effective worker higher?ii. Does the Solow growth model predict that the two economies will converge to the samesteady state? (b) Based on the Solow growth model with population growth and labor-augmenting technologicalprogress, explain how each of the following policies would affect the steady-state level andsteady-state growth rate of total output per person:i. an increase in the government’s budget deficit ii. grants to support research and development (c) Consider a Solow model where the production function no longer exhibits diminishing returnsto capital accumulation. Assume the production function is now Y = AK. What happens tothe growth rate of per capita GDP over time?
- The Solow Growth Model is a model that is often used to explain the theoretical relationship between several factors that determine a country's economic growthcountry.(a) Explain what you know about the Solow Growth Model and what are the most important determinants of a country's long-term growth rate?(b) Within the framework of the Solow Growth Model, how does population growth affect a country's economic growth rate?(c) Still within the framework of the Solow Growth Model, how does technological progress affect a country's growth rate?In the Solow growth model:1. What is the equilibrium effect of an increase in the population growth rate?2. What is the equilibrium effect of an increase in TFP?3. Which of these shocks is better able to generate sustained growth: a decrease in thepopulation growth rate, or an increase in TFP? How does this compare with theresults of the Malthusian model of economic growth?a) What do steady state and conditional convergence mean? b) Why do these happen according to the Solow Growth Model? c) How can a country that is already at a steady state continue to grow?
- Within the Solow Growth Model framework, explain why capital accumulation cannot be the main driver of growth in the long-run for a developed country (i.e. intuitively explain why an economy converges to a steady state equilibrium).(III) Consider a version of the Solow growth model without technological change covered in lecture with a rate of population growth of zero (i.e. n=0). Assume that the country has been at the BGP for many years and that suddenly at time t ̅ there is a onetime increase in its population. Show how the economy will adjust to a new BGP by working with the modified system (per capita/worker variables). Show how capital per worker adjusts to the new Steady State level and how its growth rate changes over time.Question 4The initial steady-state level of capital per worker in Tobago is 5 while the Golden Rule level ofcapital per worker is 8.a. Discuss what must change in Tobago to achieve the Golden Rule steady state?b. Why might the Golden Rule steady state be preferred to the initial steady state?c. How does population growth change the Solow Growth Model?d. Does technological progress enhance the Solow Growth Model? If so, in what ways.
- 12. Discuss how population growth affects economic growth in the Solow growth model. Also discuss alternative points of view regarding population growth and how it contributes to or detracts from economic growth.If climate change impacts (e.g., increased heat waves, droughts, wildfires, etc.) decrease the economy's technology level A, then, through the lens of the Solow growth model (and assuming the economy was originally in a steady-state), holding all else constant, we would expect it toLogically Explain these parts: (a) Explain idea of convergence or catching-up effect in detail? (b)How poor countries can sustain high growth and development?
