Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Romer Model Exercise:
Consider the Romer model, Y = A,Nyt, AAt+1
Ão = 10,1 = 0.01, z = 0.035, Ñ = 100.
ZAĄNat, and parameter values are:
(a) What is the growth rate of GDP per capita? What is the per capita GDP at period
60, Yt=60?
(b) Suppose at period 60, the number of researchers decrease by 50% permanently. Draw
a graph to show the impact. What is the value of per capita GDP, y4=60, now?
(c) Suppose now the production function is still Y; = A¿Nyt, but the accumulation of
ideas becomes AAt+1 = ZA?$ Nat. What is the growth rate of ideas?
(d) Following from (c), what is the growth rate of output per capita at period 1?
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