Consider the Romer Model (1990). Suppose the productivity parameter in the R&D sector is 0.0002 and...

Consider the Romer Model (1990). Suppose the productivity parameter in the R&D sector is 0.0002 and the stock of human capital in the economy is 2000, of which 1500 is allocated to the manufacturing of the final goods. In the final goods production sector, output elasticity with respect to labor is 0.3 and output elasticity with respect to human capital is 0.4. Answer the following questions:

a. Find the equilibrium growth rate.

b. Find the equilibrium interest rate.

c. If the current level of technology is 100 and the price of a new design for intermediate good is 1000, find the wage of human capital.

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Expert Solution

Rahul Sunny answered 1 year ago

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