Consider a two-sector model of growth, with two kinds of investment opportunities- one with a diminishing marginal product and one with a constant marginal product. a. What does the production function for this problem look like? b. Characterize the set of equilibria for this model. Does output in any of the equilibria have nonzero per capita growth? c. What can this model help us explain that strict endogenous and neoclassical growth models cannot?
Consider a two-sector model of growth, with two kinds of investment opportunities- one with a diminishing marginal product and one with a constant marginal product. a. What does the production function for this problem look like? b. Characterize the set of equilibria for this model. Does output in any of the equilibria have nonzero per capita growth? c. What can this model help us explain that strict endogenous and neoclassical growth models cannot?
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Transcribed Image Text:Consider a two-sector model of growth, with two kinds of investment opportunities- one
with a diminishing marginal product and one with a constant marginal product.
a. What does the production function for this problem look like?
b. Characterize the set of equilibria for this model. Does output in any of the
equilibria have nonzero per capita growth?
c. What can this model help us explain that strict endogenous and neoclassical
growth models cannot?
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