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growth rate of knowledge i

growth rate of knowledge i

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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2. Consider the Romer model: Y = ALyt AA++1 = ZA,Lat Lat + Lyt = L Lat = IL a) Assume that A, = 1, ī = 0.02, z = 0.0001, L = 10,000. Find the growth rate of knowledge in and the growth rate of output per person. the economy b) Compare two economies: one with parameter values as in a) and the other one with the same parameter values except for the initial set of knowledge A, = 5. Briefly explain what will be the differences in the growth rates of knowledge and output per worker? Show the paths for output per worker on a graph. c) The government believes that the growth rate of output per worker is low and thinks about measures that would increase it. There are two options: (i) doubling the share of workers employed in the research sector, and (ii) increasing the population size by one third. The government can choose only one option. Which option would you recommend and why? Use a graph in your answer.
Transcribed Image Text:2. Consider the Romer model: Y = ALyt AA++1 = ZA,Lat Lat + Lyt = L Lat = IL a) Assume that A, = 1, ī = 0.02, z = 0.0001, L = 10,000. Find the growth rate of knowledge in and the growth rate of output per person. the economy b) Compare two economies: one with parameter values as in a) and the other one with the same parameter values except for the initial set of knowledge A, = 5. Briefly explain what will be the differences in the growth rates of knowledge and output per worker? Show the paths for output per worker on a graph. c) The government believes that the growth rate of output per worker is low and thinks about measures that would increase it. There are two options: (i) doubling the share of workers employed in the research sector, and (ii) increasing the population size by one third. The government can choose only one option. Which option would you recommend and why? Use a graph in your answer.
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