Economy is on balanced growth path

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Reference no: EM13892091

Suppose the economy is on a balanced growth path in the Romer model, and then, in the year 2030, research productivity rises permanently to ¯ z ′ > ¯ z .

a) Solve for the new growth rate of knowledge and y t .

b) Make a graph of y t over time (on a ratio scale).

c) Why might the parameter ¯ z increase in an economy?

Reference no: EM13892091

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