Principles of Economics (Second Edition)
2nd Edition
ISBN: 9780393614077
Author: coppock, Lee; Mateer, Dirk
Publisher: W. W. Norton & Company
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Question
Chapter 25, Problem 8QFR
To determine
(a)
To explain:
The meaning of steady state of an economy and its inevitability.
To determine
(b)
To explain:
The Solow's convergence concept and its empirical study.
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Beyond the Solow model, how do endogenous growth theories provide greater understanding of the process of economic growth?
Which one of the following is the most accurate description of growth theory?
A) Growth theory tries to predict long-run growth rates of actual economies.
B) Growth theory studies only the proximate causes of growth such as capital and productivity.
C) Growth theory tries to explain both the causes and consequences of economic growth in the long-run.
D) The main objective of growth theory is to generate policy advise for governments.
What can the Solow model tell us about growth in the short term and in the long term? What is different between the Solow model and the endogenous growth model?
Chapter 25 Solutions
Principles of Economics (Second Edition)
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- Evaluate 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_forwardWhy do diminishing returns not limit growth in new growth theory? Diminishing returns do not limit growth in new growth theory becausearrow_forwardList 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?arrow_forward
- Graphically show and explain the effect of the followings on the Steady State in Solow Growth Model, (Graph should be properly labelled and clearly drawn) a) The investment rate decreases. b) A fall in the depreciation rate.arrow_forwardExplain the different ways in which inequality can affect growth. Highlight any existing empirical evidence that you find interesting. Why?arrow_forwardIn the Solow growth model, carefully explain the convergence hypothesis. In your answer, describe possible causes of income convergence, and the evidence of convergence across the world.arrow_forward
- Explain about the potential limitations of the Solow growth model and endogenous growth model that will affect the standard of living of a country.arrow_forwardConsider the Solow growth model. In a diagram, illustrate the effect of an increase in the rate of technological progress on the steady-state level of output per effective worker. What happens to the long-run growth rate of output per worker? Explain and give economic intuition for your answer.arrow_forwardHow does the Solow growth model explain economic growth?arrow_forward
- Carefully 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_forwardDiscuss the Solow Growth Model and carefully explain how its critical components impact the model. (Include graphs and equations where necessary)arrow_forwardAn increase in research productivity: Suppose the economy is on a balanced growth path in the Romer model, and then, in the year 2030, research productivity z̅ rises immediately and permanently to the new level z̅′. Solve for the new growth rate of knowledge and yt. Make a graph of yt over time using a ratio scale. Why might research productivity increase in an economy? I do not understand how to solve this, I'm confused. Am I supposed to make an equation or write out an answer?arrow_forward
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