Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
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Chapter 9, Problem 5QQ
To determine
The endogenous growth theory.
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Students have asked these similar questions
Which of the following most likely causes a shift of the Solow growth curve to the right?
A) an increase in the money supply
B) a decrease in tax revenues
C) an increase in crop production due to more rainfall
D) an increase in oil prices due to a fire in a major oil refinery
E) None of the above.
T/F/U. The Solow Model says that economic growth is a function of two things: capital and ideas.
There exist several drawbacks in the Solow growth model (Solow, 1956) that does not make the model provide satisfying answers to the central questions about economic growth.
Explain the key problems with the Solow growth model that led to the emergence of the endogenous growth models (e.g., productive externalities and R&D models of endogenous growth)
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- The validity and ability of the Solow Growth Model in explaining the long-term growth of a country has been tested empirically.(a) In the Solow Growth Model we are introduced to the concept of the Golden Rule; optimum level of saving and capital formation to support growth. Is this Golden Rule concept proven empirically?(b) From what we have learned from the Solow Growth Model, describe some policies that can improve a country's economic growth rate.arrow_forwardWhat are the differences between the Solow model and endogenous growth theories?arrow_forwardUsing examples and clearly labelled graphs where applicable answer the following question: When was the Solow growth model developed and what was significant about that period? What did it predict that was significant at the time? When was the endogenous growth model developed? What did researchers observe in the world that led to its development? What is the main feature that differentiates the two?arrow_forward
- 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).arrow_forwardCarefully 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.arrow_forwardSuppose that the depreciation rate increases. In the Solow growth model, determine the effects of this on the quantity of capital per worker and on output per worker in the steady state. Explain the economic intuition behind your results.arrow_forward
- When was the Solow growth model developed and what was significant about that period? What did it predict that was significant at the time? When was the endogenous growth model developed? What did researchers observe in the world that led to its development? What is the main feature that differentiates the two?arrow_forwardSolow's Growth Model provides the hypothesis that capital accumulation can boost economic growth. a) Through a system of mathematical equations, describe the production side of the output of the Solow economy! b) Explain both through narrative and mathematical equation systems how savings rates can affect per capita income growth!arrow_forwardEvaluate the following statement. People do not save enough or invest enough in their education. What would be the arguments for and against government policies that encourage an increase in private savings and more investment in education? Using appropriate equations and graphs, consider the implications of both the Solow growth model and the endogenous growth model, but also their limitations, when addressing these questions.arrow_forward
- Explain to me how solow growth and endogenous growth have relation to the standard of living of a country?arrow_forwardThe Solow Growth Model is an exogenous model of economic growth that analyzes changes in the level of output in an economy over time as a result of changes in the population growth rate, the savings rate, and the rate of technological progress. Consider the Solow model. a) Explain using a graph why there is a poverty trap in this model b)Describe how an economy such as one characterized by this model may break out of a poverty trap.arrow_forwardIn 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?arrow_forward
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