What is the growth rate of knowledge in this economy

Assignment Help Business Economics

Reference no: EM131194525

Consider the following variation of the Romer model.

Yt = Aα t ·Lyt, 0 < α < 1 (1)

?At+1 = z·At ·Lat (2)

L = Lyt + Lat (3)

Lat = `·L (4)

The only di?erence is the exponent on At, α.

a. Provide an economic interpretation for each equation.

b. Demonstrate that 0 < α < 1 means there is a diminishing marginal product to ideas in this economy.

c. Show that there are still increasing returns to scale (ideas and labour) in this economy.

d. What is the growth rate of knowledge in this economy?

e. What is the growth rate of output per capita in this economy? (Hint: if y(t) = x(t)a then the growth rates are related as follows gy(t) = agx(t).)

f. Solve for the level of output per capita at each point in time.

Reference no: EM131194525

Questions Cloud

What is the equilibrium rate of interest : The demand for money in a country is given by Md = 10,000 - 10,000r + where Md is money demand in dollars, r is the interest rate (a 10 percent interest rate means r = 0.1), and is national income. Suppose the money supply (Ms) is set by the central ..

Discuss how the egyptians influenced the early greek culture : Discuss how the Egyptians influenced the Early Greek culture. Please choose one example from Egypt and one from Greece in either Art, sculpture, religion, architecture, or politics and show this influence.

Decrease the short-term interest rate : On June 5, 2003, the European Central Bank acted to decrease the short-term interest rate in Europe by half a percentage point, to 2 percent. The bank’s president at the time,Willem Duisenberg, suggested that, in the future, the bank could reduce rat..

Draw the network : EMP 515 Materials and Logistics Management Spring 2014 Exam Questions. Formulate a transshipment and balanced transportation model to minimize the daily cost of transportation and refining the oil requirements of LA and NY

What is the growth rate of knowledge in this economy : Consider the following variation of the Romer model. Provide an economic interpretation for each equation. Demonstrate that 0

Explain at least two methods the reagan administration used : Discuss two areas of the United States economy that Ronald Reagan deregulated in the eighties. Explain at least two methods the Reagan Administration used to deregulate these particular agencies or programs.

What were some of the stances of the republican party : What were some of the stances of the Republican Party and it's Presidential candidate Abraham Lincoln in 1860 that put it at odds with members of the Democratic Party and many southerners?

Is demand elastic or inelastic at this price and quantity : Suppose that you have estimated the following demand function for your firm. What is the profit-maximizing level of production? What is the profit-maximizing price at this output? What is the own price elasticity of demand at this level of output? Is..

Determine the optimal pricing schedule : A nightclub manager realizes that demand for drinks is more elastic among students, and is trying to determine the optimal pricing schedule. The two age groups visit the nightclub in equal numbers on average. Assume that drinks cost the nightclub $2 ..

User Account

All Pages