Question

In: Economics

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.

Solutions

Expert Solution

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

Consider the Romer economy with the following parameter values: A0=100, 6% of the workforce is employed...
Consider the Romer economy with the following parameter values: A0=100, 6% of the workforce is employed in research sector, research productivity is z=1/3,000 and the workforce equals 1,000. 1. What is the initial level of output per person (in period 0)? A. 114 B. 100 C. 102 D. 96 2. What is the level of output per person after 100 years? Pick the closest value A. 996 B. 699 C. 681 D. 96 3. Suppose that adjustments to immigration policy...
Suppose that two economies, Cicero and Berwyn, are described by the Romer model, they are identical...
Suppose that two economies, Cicero and Berwyn, are described by the Romer model, they are identical in every way except that the initial stock of ideas in Cicero is larger than the initial stock of ideas in Berwyn. If Berwyn increased the share of the labor force that is engaged in the production of new ideas, will Cicero and Berwyn still have a different growth rate of per capita GDP and levels of GDP?
What policies would encourage private sector R&D, and university and public R&D. Which of these policies...
What policies would encourage private sector R&D, and university and public R&D. Which of these policies have the highest public costs? Can you think of a way to focus any necessary public spending in a way that will get the most R&D bang for your buck?
Consider a multiplicative binomial model with N = 3, r = 0, u = 1.2, d...
Consider a multiplicative binomial model with N = 3, r = 0, u = 1.2, d = 0.8 and S 0 = 100. At time t = 1 when S 1 = 120 a (european) call option with maturity at T = 3 and struck at 100 is quoted at 25. Is that a fair value? If yes explain why? If not explain why and explicitly define an arbitrage strategy (you have to give details of the arbitrage strategy)
Consider a multiplicative binomial model with N = 3, r = 0, u = 1.2, d...
Consider a multiplicative binomial model with N = 3, r = 0, u = 1.2, d = 0.8 and S 0 = 100. At time t = 1 when S 1 = 120 a (european) call option with maturity at T = 3 and struck at 100 is quoted at 25. Is that a fair value? If yes explain why? If not explain why and explicitly define an arbitrage strategy (you have to give details of the arbitrage strategy)
Consider a two-period binomial tree model with u = 1.05 and d = 0.90. Suppose the...
Consider a two-period binomial tree model with u = 1.05 and d = 0.90. Suppose the per-period interest rate is 2%. Suppose the initial stock price is $100. Consider $95-strike call and put options on this stock. Which of the following statement is false based on above information? The put premium is $12.01 Possible payoffs of a call at the end of the two periods are $14.25, $0, and $0 Possible payoffs of a put at the end of the...
Consider two stages of production of mobile phones: research and development (R&D), and component production. Suppose...
Consider two stages of production of mobile phones: research and development (R&D), and component production. Suppose U.S. firms have comparative advantage in R&D, and Indian firms have comparative advantage in component production. Assume realistically that inflows of engineers from India to the U.S. reduces cost of R&D in the U.S. Explain the effects of inflows of engineers from India on the pattern of offshoring by U.S. firms and on the gains from offshoring.
Essay question (1). 1. (10) We discussed R&D (research and development) as a driver of productivity...
Essay question (1). 1. (10) We discussed R&D (research and development) as a driver of productivity growth. In that context, we saw that intellectual property rights protection often is set to balance ex ante and ex post efficiency. a. Describe what is meant by ex ante and ex post efficiency in this context. How do the two perspectives on efficiency differ? b. What type of intellectual property rights protection is argued for from the ex ante efficiency perspective? From the...
a. Consider d on R, the real line, to be d(x,y) = |x2 – y2|. Show...
a. Consider d on R, the real line, to be d(x,y) = |x2 – y2|. Show that d is NOT a metric on R.    b.Consider d on R, the real line, to be d(x,y) = |x3 – y3|. Show that d is a metric on R.    2. Let d on R be d(x,y) = |x-y|. The “usual” distance. Show the interval (-2,7) is an open set. Note: you must show that any point z in the interval has...
Consider the standard Solow growth model. Let productivity be denoted by A and let the production...
Consider the standard Solow growth model. Let productivity be denoted by A and let the production function be Y=AF(K,N). For simplicity, assume that there is no population growth (n=0 so that N'=N). Let depreciation be denoted by d and the savings rate by s. a. Derive the per capita capital accumulation equation for k=K/N and the steady state level of capital per worker, kss. Please show the details of your derivation to earn points. Draw the Solow model graph showing...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT