b) The Romer model focuses on the production of (non-rival) ideas. In class we assumed the production function for ideas to be A = A(1-I)L ^ Theta Explain what would happen to long-run growth if instead the production function for ideas is with Theta < 1and I, L constant. Hint: First calculate the growth rate A and sketch it in a time vs. A/A diagram.

Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter17: Production And Growth
Section17.1: Economic Growth Around The World
Problem 1QQ
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b)
The Romer model focuses on the production of (non-rival)
ideas. In class we assumed the production function for ideas to be
A = A(1-I)L ^ Theta
Explain what would happen to long-run growth if instead the production function for ideas is with Theta < 1and I, L
constant. Hint: First calculate the growth rate A and sketch it in a time vs. A/A diagram.
Transcribed Image Text:b) The Romer model focuses on the production of (non-rival) ideas. In class we assumed the production function for ideas to be A = A(1-I)L ^ Theta Explain what would happen to long-run growth if instead the production function for ideas is with Theta < 1and I, L constant. Hint: First calculate the growth rate A and sketch it in a time vs. A/A diagram.
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