Reference no: EM133082817

In class we argued that if people could accumulate human as well as physical capital, the production function would look like the "AK" production function.

(a) If the production function is AK and the savings rate is constant at rate "s", and the rates of depreciation and population growth are δ and n respectively, what would the growth rate of the economy be?

(b) What would be the macroeconomic consequences of decreasing the savings rate in this economy?

(c) What would be the consequences of an increase in fertility in this economy?

(d) Would the consequences of decreasing fertility be UNAMBIGUOUSLY GOOD?

(e) Can human capital grow without bounds? Explain why or why not (make sure you discuss the physical nature of human capital).

(f) What is the growth rate of the economy (in the absence of technological progress) if human capital cannot grow without bounds