1. [3 points each] Indicate whether each of the following statements is true or false. Ex- plain briefly. (a) According to the Solow growth model, a reduction in population growth can raise the growth rate of real GDP per capita. (b) In the simple Romer model, the economy may sometimes deviate from the bal- anced growth path. (c) If the number of employed people increases, the unemployment rate falls. (d) Efficiency wage can lead to involuntary unemployment.

The Solow Growth Model is a model that is often used to explain the theoretical relationship between several factors that determine a country's economic growthcountry.(a) Explain what you know about the Solow Growth Model and what are the most important determinants of a country's long-term growth rate?(b) Within the framework of the Solow Growth Model, how does population growth affect a country's economic growth rate?(c) Still within the framework of the Solow Growth Model, how does technological progress affect a country's growth rate?

11. Alter the Solow growth model so that the pro- duction technology is given by Y= zK, where Y is output, K is capital, and z is total factor pro- ductivity. Thus, output is produced only with саpital. (a) Show that it is possible for income per person to grow indefinitely. (b) Also show that an increase in the savings rate increases the growth rate in per capita income.

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According to Solow growth model, which are the main factors leading to expect convergence across regions. In addition, discuss which factors, if any, may lead to expect no convergence. b) In 2010, GDP per capita of the region of Brussels (Belgium) was €55000, while that of Severozapaden (Bulgaria) was €6.500. Assume that, from 2010 onwards Brussels maintains a constant anual growth of 2% during 50 years. • Obtain the (constant) annual growth rate at which the region of Severozapaden should grow in order to attain the same GDP per capita of Brussels after this period (50 years). Hint: use instantaneous annual growth rates. c) Discuss the implications of your answers in sections a) and b) for EU's regional policy.

How can we measure growth over the very long run? Te poorest countries in the world have a per capita income of about $600 today. We can reason-ably assume that it is nearly impossible to live on an income below half this level (below $300). Per capita income in the United States in 2015 was about$51,000. With this information in mind, consider the following questions.(a) For how long is it possible that per capita income in the United Stateshas been growing at an average annual rate of 2% per year?(b) Some economists have argued that growth rates are mismeasured. Forexample, it may be difcult to compare per capita income today with percapita income a century ago when so many of the goods we can buy todaywere not available at any price then. Suppose the true growth rate in thepast century was 3% per year rather than 2%. What would the level of percapita income in 1800 have been in this case? Is this answer plausible?

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part D E F

8. Reinterpret the endogenous growth model in this chapter as follows. Suppose that there are two groups of people in a country, the low- skilled workers and the high-skilled workers. The low-skilled workers have less human cap- ital per person initially than do the high-skilled workers. In the economy as a whole, output is produced using efficiency units of labor, and total factor productivity is z, just as in the endogenous growth model in this chapter. Each individual in this economy accumulates human capital on their own, and each has one unit of time to split between human capital accu- mulation and work. However, now b = bn for the high-skilled, b un for the high-skilled, and u the low-skilled. In the United States, there has been an increase in the gap between the wages of high-skilled workers and low-skilled work- ers, that has occurred over the last 30 years or bị for the low-skilled, for so. Determine how this model can explain this observation, and discuss.

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