Principles of Economics (Second Edition)
2nd Edition
ISBN: 9780393614077
Author: coppock, Lee; Mateer, Dirk
Publisher: W. W. Norton & Company
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Chapter 25, Problem 2QFR
To determine
To explain:
The key properties of aggregate production function of Solow's
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Based on article "Technology and economic growth: From Robert Solow to Paul Romer" by Rui Zhao, Solow mentioned technology (At) and capital per unit of effective labor (Kt) have a significant influence on a country's ability to “catch-up” or “converge” to a steady-state level (K*). Why did Solow model assume At as a black box in economics? Explain in brief.
Based on article "Technology and economic growth: From Robert Solow to Paul Romer" by Rui Zhao, Solow mentioned technology (At) and capital per unit of effective labor (Kt) have a significant influence on a country's ability to “catch-up” or “converge” to a steady-state level (K*). Using the central equation of the Solow model, discuss the influence of At and Kt on country's ability to grow and move to a steady-state level (K*).
Why is a Cobb-Douglas production function useful for analyzing economic growth?
Chapter 25 Solutions
Principles of Economics (Second Edition)
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- Long-run economic growth can occur as a result ofarrow_forwardYou were discussing the growth models with your friend Gaston during spring break. He summarized that the basic difference between the Solow model and the Romer model is that the Solow model suffers from diminishing returns-each additional unit of capital has less benefit than the previous unit. The Romer model doesn't have the same problem as labor used to generate new ideas doesn't have diminishing returns. He hypothesizes that if you changed the law of motion to At+1 = At + zol1/2A; that now the Romer model has diminishing returns to labor and will reach a steady state where growth is zero. Is he right?arrow_forwardSuppose that , the marginal product of efficiency units of labor, increases in the endogenous growth model. What effects does this have on the rates of growth and the levels of human capital, consumption, and output? Explain your results.arrow_forward
- What is a significant factor in long-run economic growth that Robert Fogel, an economic historian, is best known for suggesting?arrow_forwardBased on article "Technology and economic growth: From Robert Solow to Paul Romer" by Rui Zhao, Romer has successfully opened the black box and explained how technology can be produced by an economy without having to rely on external (exogenous) technology. Using the central equations of the Romer’s model. discuss how technology (A)t can be produced by a country to stimulate economic growth?arrow_forwardConsider the Swan-Solow model of economic growth. [Hint: Question (e) below goes beyond the subject matter discussed in the lecture and requires you to think independently.] Draw a typical Investment curve into the diagram. Briefly explain how you came up with thearrow_forward
- In the long run, the growth rate of output per worker is determined by the: the saving rate only the growth rate of technology and the growth rate of population the growth rate of technology, the growth rate of population and the saving rate the growth rate of population only the growth rate of technology onlyarrow_forwardWhy perfect competition is not assumed in the endogenous growth model? Explain. please try and keep the answer simplearrow_forwardBased on article "Technology and economic growth: From Robert Solow to Paul Romer" by Rui Zhao, Solow mentioned, technology (At) and capital per unit of effective labor (Kt) have a significant influence on a country's ability to “catch-up” or “converge” to a steady-state level (K*). In brief define what it means by a steady-state level.arrow_forward
- What is the difference between extensive and intensive growth? Why was the Soviet Union successful in terms of extensive growth under Stalin, but failed to succeed in terms of intensive growth during the reform periods under Khrushchev and Gorbachev?arrow_forwardWhy economic growth is one of the goals of macroeconomics?arrow_forwardThere 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)arrow_forward
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