EBK MACROECONOMICS (FOURTH EDITION)
4th Edition
ISBN: 9780393616125
Author: Jones
Publisher: YUZU
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Chapter 6, Problem 5RQ
To determine
Rate of output in Romer model.
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Students have asked these similar questions
Suppose 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 percent
In the Romer model, if an economy's share of researchers decreases, there will be
A) an immediate decrease in output and output growth will slow.
B) an immediate increase in output and output growth will slow.
C) an immediate increase in output and output growth will accelerate.
D) an immediate decrease in output and output growth will accelerate.
E) no change in output but output growth will slow.
Consider the economic model:
Yt =
C +i
Ct
myt-1
act-1
where
is GDP, c is consumption, i is investment, m and a are multipliers.
(i) Write down a difference equation for y
(ii) Find the condition under which the steady state exists, and find the
steady state solution
Chapter 6 Solutions
EBK MACROECONOMICS (FOURTH EDITION)
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- We 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_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_forwardSolow model. One economy evolves as in the baseline Solow model. The production function is Cobb-Douglas with a = 0.5. The number of workers is constant at N = 100 million. The saving rate is 22% of income and the stock of capital depreciates a 5% every year. In the current year t, there are Kt = 625 million units of installed capital. Write down the dynamic equation for capital accumulation and find the change in capital per worker from year t to year t + Report the rates of growth of capital per worker, output per worker and consumption per worker from year t to year t + 1. Find the amounts for capital per worker, output per worker, and consumption per worker in steady state. Make a graphical representation of the accumulation of capital per worker in year t and discuss the future evolution to reach the steady state (long-run) Calculate the golden-rule level of capital per worker for this economy and report the gain of consumption per worker obtained relative to the value in…arrow_forward
- The production function for an economy can be expressed as Y= F(K,L), where Y is real GDP, K is the quantity of capital in the economy, and L is the quantity of labor in the economy. If Y = K0.5 L0.5, what is real GDP if the quantity of capital is 900 and the quantity of labor is а. 400? b. What is/are the endogenous variable(s) in this model? What is/are the exogenous variable(s) in this model? с.arrow_forwardOne problem with all exponential growth models is that nothing can grow exponentially forever. Describe factors that might limit the size of a population.arrow_forwardConsider the model you developed in Question 1, where labor growth at a constant rate. Suppose that F(K, L) = K0.5 L0.5 with d = 0.1, s = 0.2, n = 0.01, and A = 1, and take a period to be a year. Question 2 Part a Determine capital per worker, income per capita, and consumption per capita in the steady state. Question 2 Part b Now, suppose that the economy is initially in the steady state that you calcu- lated in Part a. Then, s increases to 0.4 Question 2 Part b1 Determine capital per worker, income per capita, and consumption per capita in each of the 10 years following increase in the savings rate Question 2 Part b2 Determine capital per worker, income per capita, and consumption per capita in the new steady state. Question 2 Part b3 Discuss your results, in particular, comment on the speed of adjustment to the new steady state after the change in the savings rate, and the paths followed by capital per worker, income per capita, and consumption per capita.arrow_forward
- Hi. I just need to know the true or false for the bottom 5 please?arrow_forwardIn the Malthusian model, suppose that the quantity of land increases. A) using diagrams, determine what effects this has in the long-run steady state and explain your results. b)Plot what happens to the following variables over time as a result of the increase in the quantity of Land, population size and consumption per personarrow_forwardConsider an economy with a Cobb-Douglas production function with α = 1/3 that begins in steady state with a growth rate of technological progress of g of 2 percent. Consider what happens when g increases to 3 percent. (a) What is the growth rate of output per worker before the change? What happens to this growth rate in the long run? (b) Perform a growth accounting exercise for the economy, decomposing the growth rate in output per capita into components contributed by capital per capita growth and technology growth. What is the contribution of the change in g to output per capita growth according to this formula? (c) In what sense is the growth accounting result in part b producing a misleading picture of this experiment? Explain why this is the case.arrow_forward
- consider the generalized Romer model where the fishing-out effect and the decreasing returns to research are allowed. suppose the number of researchers grows 5% each year and labor-augmenting technology level grows 1% each year. then, there exists an upper limit for the fishing-out effect in steady state. evaluate whether is true, false or uncertain and why?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_forwardAssume that a E (0, 1). Draw a diagram that describes the evolution of kt, and show that there exists a unique steady state, k* > 0. Label properly. Find the expressions for the steady state variables k*, y*, and c* in terms of the parameters of the model. , Now, assume that α = 1. Draw a diagram that describes the evolution of kt, and show that income per worker can grow indefinitely in this case. Label properly.arrow_forward
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