An increase in research productivity: Suppose the economy is on a balanced growth path in the Romer model, and then, in the year 2030, research pro-ductivity z rises immediately and permanently to the new level z r. (a) Solve for the new growth rate of knowledge and yt.(b) Make a graph of yt over time using a ratio scale.
An increase in research productivity: Suppose the economy is on a balanced growth path in the Romer model, and then, in the year 2030, research pro-ductivity z rises immediately and permanently to the new level z r. (a) Solve for the new growth rate of knowledge and yt.(b) Make a graph of yt over time using a ratio scale.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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An increase in research productivity: Suppose the economy is on a balanced
growth path in the Romer model, and then, in the year 2030, research pro-
ductivity z rises immediately and permanently to the new level z r.
(a) Solve for the new growth rate of knowledge and yt.
(b) Make a graph of yt over time using a ratio scale.
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