The neoclassical theory of growth identifies the steady-state rate of growth as the _________ just sufficient to keep ____________ constant while labour grows. technology, productivity consumer demand, output investment, capital per person savings, investment
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The neoclassical theory of growth identifies the steady-state rate of growth as the _________ just sufficient to keep ____________ constant while labour grows.
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technology, productivity |
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consumer demand, output |
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investment, capital per person |
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savings, investment |
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- Based on the Neoclassical Growth Model explain in detail what are the critical determinants of economic growth. Also, specify related assumptions.List the two most important factors influencing Long-run Economic Growth. According to Neoclassical (Solow) growth theory, what factor has been the most important driver of US economic growth in the last century? What has been the most important influence on growth according to New Growth Theory?According to the neoclassical growth model, the production function of an economy can be represented as Y=f(L,K, A). Which of the following is considered as a decline in technology under this framework? A fall in the capital to labour ratio Depreciation of capital stock A fall in labour to capital ratio. An increase in the number of steps a business must take to obtain government approval to sell a new product Reduction in immigration
- What would be the effect of each of the following events on actual and potential economic growth? (Assume no other changes take place.) d) Increased expenditure on education and training. Actual growth: rise / fall / no effect Potential growth: rise / fall / no effect (e) The discovery of new, more efficient techniques which could benefit industry generally. Actual growth: rise / fall / no effect Potential growth: rise / fall / no effect (f) A reduction in interest rates. Actual growth: rise / fall / no effect…What would be the effect of each of the following events on actual and potential economic growth? (Assume no other changes take place.) (a) A reduction in the level of investment. Actual growth: rise / fall / no effect Potential growth: rise / fall / no effect (b) People save a larger proportion of their income. Actual growth: rise / fall / no effect Potential growth: rise / fall / no effect (c) A reduction in the working week. Actual growth: rise / fall / no effect Potential growth: rise / fall / no effect (d) Increased expenditure on education and training.…In this question, you will explore how changes in the saving rate and the rate of technological progress affect an economy’s growth. In addition, you will examine how the golden rule saving rate depends on the production function. Consider the Solow (neoclassical) growth model with aggregate production function Y = K^alpha(AN)^(1-alpha). Each period lasts a year.
- In the neoclassical growth model, an increase in the growth of the labor force will Increase growth in income per capita Increase growth in income per capita but only in the short run Have no effect on growth of income per capita in the short or the long run Will reduce growth in income per capita Will reduce growth in income per capita over the short but not the long run In the neoclassical growth model, an increase in saving will Increase growth Increase growth but only temporarily Have no effect on growth in the short or the long run Will reduce growth We do not have enough informationLong-run economic growth can occur as a result ofSuppose an economy begins in steady state. By what proportion does per capita GDP change in the long run in reponse to each of the following changes? Production function is Y=AK^1/3L^2/3 a. Investment rate doubles b. depreciation rate falls by 10% c. Productivity level rises by 10% d. Earthquake destrys 75% of the capital stock e. Generous immigration policy lead the population to double
- 7. 1. Consider a neoclassical growth economy described by the following.•Yt = K0.3t ·L0.7t (aggregate production function)•s = 0.35 (saving rate)•δ = 0.10 (depreciation rate)•n = 0.01 (population growth rate)•L1 = 120 (initial population)•K1 = 160 (initial capital stock)•g = 0 (technological growth rate)Compute K, Y , k, y, and c for the first three periods. Please report numerical answersto two decimal points. (a) K1 = ; Y1 = ; k1 = ; y1 = ; c1 =(b) K2 = ; Y2 = ; k2 = ; y2 = ; c2 =(c) K3 = ; Y3 = ; k3 = ; y3 = ; c3 =Consider 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.The steady occurs when the economy is in equilibrium. Specifically, the steady state refers to the situation where K/N and Y/N are constant. K/N will not change when investment per worker equals depreciation per worker. During the adjustment process, the growth rates of Y, Y/N, and K/N will all be negative. Once the steady state is reached, these variables are constant and the growth rates will be zero. True False
