a) In the Solow growth model, capital exhibits diminishing returns. In a basic endogenous growth model,...

a) In the Solow growth model, capital exhibits diminishing returns. In a basic endogenous growth model, capital exhibits constant returns. What is the main implication of these differences to economic growth of a country/countries?

b) Suppose unemployment rate in Sweden this year dropped to the lowest level ever than before. Oddly, employment rate also fell from the prior year. How was this possible?

Expert Solution

Rahul Sunny answered 1 year ago

In the Solow growth model, capital exhibits diminishing returns. In a basic endogenous growth model, capital...

In the Solow growth model, capital exhibits diminishing returns. In a basic endogenous growth model, capital exhibits constant returns. What is the main implication of these differences to economic growth of a country/countries?

Critically access the theoretical propositions of the Solow neo-classical model of growth. How does endogenous growth...

Critically access the theoretical propositions of the Solow neo-classical model of growth. How does endogenous growth model help to address some of the weaknesses of the Solow model? Illustrate the implications of technical advances and saving rates increase on growth according to both of these approaches.50 marks

Suppose we started out at the steady state capital stock in the basic Solow growth model....

Suppose we started out at the steady state capital stock in the basic Solow growth model. If there subsequently were a decrease in the demand for loanable funds due to less favorable tax treatment of business investment (and no shift in the supply of loanable funds), then we would expect to see: a. economic growth rates increase in the short run and the nation's capital stock to grow from its current level. b. economic growth rates become negative in the...

Explain why there is no convergence in the Human Capital (Endogenous Growth) model

What happens with no diminishing returns? Consider a Solow model where the production function no longer...

What happens with no diminishing returns? Consider a Solow model where the production function no longer exhibits diminishing returns to capital accu- mulation. This is not particularly realistic, for reasons discussed in Chapter 4. But it is interesting to consider this case nonetheless because of what it tells us about the workings of the Solow model. Assume the production function is now Yt = AKt. The rest of the model is unchanged. (a) Draw the Solow diagram in this case....

In the Solow model, the relationship between growth in capital stock and economic growth is not...

In the Solow model, the relationship between growth in capital stock and economic growth is not linear due to the model’s dependence on a production function that exhibits diminishing returns to capital. Therefore, the perceived impact of capital accumulation on economic growth requires the interplay of technological change and factor productivity. Explain this statement with the aid of the basic model: g = Wk x gk + WL x gL + a

Verify that the following are true in the basic Solow growth model with no technological progress...

Verify that the following are true in the basic Solow growth model with no technological progress and no population growth: (a) The real rate of return R/P is constant along the BGP (b) The real wage W/P is constant along the BGP (c) The capital to labor ratio K/N is constant along the BGP (d) The capital to output ratio K=/Y is constant along the BGP How do these results match up to the Kaldor and Kuznets stylized facts?

In the context of long-run growth what is meant by diminishing returns to capital and why...

In the context of long-run growth what is meant by diminishing returns to capital and why will diminishing returns to capital occur?

In the basic Solow model, an economy in a steady state has an economic growth rate...

In the basic Solow model, an economy in a steady state has an economic growth rate equal to a. The depreciation rate b. The savings rate c. The marginal product of capital d. Zero 2. Long time lags in the implementation of monetary policy a. Reduce the ability of the Fed to manage the economy b. Enhance the ability of the Fed to manage the economy c. Reduce the monetary base d. Increase the monetary base 3. An important principle...

14. In the Solow growth model, output ? is produced using capital ? and labour ?....

14. In the Solow growth model, output ? is produced using capital ? and labour ?. There are constant returns to scale, and diminishing returns to capital and labour individually. The production function is ? = ?(?, ?), capital depreciates at rate ?, the population grows at rate ?, and the saving rate is ?. (a) Sketch graphs of saving per worker, and the amount of investment per worker needed to maintain a constant level of capital per worker, both...

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