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EBK MACROECONOMICS (FOURTH EDITION)
4th Edition
ISBN: 9780393616125
Author: Jones
Publisher: YUZU
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Chapter 5, Problem 7RQ
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The principle of transition dynamics and the reason why the Solow model leads to this.
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What determines whether a curve shifts in the Solow diagram? Make a listof the parameters of the Solow model, and state whether a change in eachparameter shifts a curve (which one?) or is simply a movement along bothcurves.
This question is with regards to Solow-Swan Model. Define what steady-state equilibrium is and how do key variables behave at the steady-state.
What is the principle of transition dynamics? Why does the Solow model leadto this principle, and why is it useful?
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- In which ways the product-cycle model inconsistent with the Heckscher-Ohlin model? In which ways are the two consistent?arrow_forwardBriefly discuss drawbacks of Solow model?arrow_forwardSuppose the parameters of the Romer model take the following values: A = 100 = 0.05, Z = 1/100, and I = 1,000. What is the growth rate of this country's economy? 10 percent O 40 percent O 0.02 percent O 50 percent O 0.10 percentarrow_forward
- Why is the Malthusian model no longer regarded as an explanation for modern economies? What are the main differences between the Malthusian and the Solow models?arrow_forwardIf there is technological progress what will happen to the solow model ? Sketch itarrow_forwardDefine equilibrium and steady state. Can we find a steady state for each dynamic general equilibrium model? Why or why not?arrow_forward
- Consider the Solow Model. Suppose a country enacts a tax policy that discourages investment, and the policy reduces the investment rate immediately and permanently from sbar to sbarprime . Assuming the economy (and hence the initial capital stock) is in its initial steady state, use the Solow Model to explain what happens to the economy over time and in the long run. Draw a graph showing how output evolves over time (put Y_t on the vertical axis with a ratio scale and time on the horizontal axis), and explain what happens to economic growth over time.arrow_forwardIn which ways the product-cycle model inconsistent with the Heckscher-Ohlin model? In which ways are the two consistent? Explain in detail.arrow_forward2. Consider the Romer model: Y = ALyt AA++1 = ZA,Lat Lat + Lyt = L Lat = IL a) Assume that A, = 1, ī = 0.02, z = 0.0001, L = 10,000. Find the growth rate of knowledge in and the growth rate of output per person. the economy b) Compare two economies: one with parameter values as in a) and the other one with the same parameter values except for the initial set of knowledge A, = 5. Briefly explain what will be the differences in the growth rates of knowledge and output per worker? Show the paths for output per worker on a graph. c) The government believes that the growth rate of output per worker is low and thinks about measures that would increase it. There are two options: (i) doubling the share of workers employed in the research sector, and (ii) increasing the population size by one third. The government can choose only one option. Which option would you recommend and why? Use a graph in your answer.arrow_forward
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