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Homework answers / question archive / Rensselaer Polytechnic Institute - ACCT ACCT 3371 CHAPTER 6 Growth and Ideas MULTIPLE-CHOICE 1)In Romer’s influential paper he divided the economic world into resources and ideas

Rensselaer Polytechnic Institute - ACCT ACCT 3371 CHAPTER 6 Growth and Ideas MULTIPLE-CHOICE 1)In Romer’s influential paper he divided the economic world into resources and ideas

Accounting

Rensselaer Polytechnic Institute - ACCT ACCT 3371

CHAPTER 6

Growth and Ideas

MULTIPLE-CHOICE

1)In Romer’s influential paper he divided the economic world into

    1. resources and ideas.
    2. objects and resources.
    3. objects and ideas.
    4. utilities and objects.
    5. None of the above.

 

 

  1. Which of the following are (an) example(s) of idea(s)?
    1. new irrigation techniques
    2. turning sand into computer chips
    3. the assembly line
    4. All of the above.
    5. None of the above.

.

 

  1. Which of the following flowcharts best summarizes Romer’s description of ideas and growth?
    1. Ideas → Nonrivalry → Increasing returns → Imperfect competition
    2. Ideas → Capital → Constant returns → Imperfect competition
    3. Capital → Rivalry → Increasing returns → Perfect competition
    4. Ideas → Rivalry → Increasing returns → Perfect competition
    5. Capital → Nonrivalry → Decreasing returns →

Imperfect competition

.

 

 

 

  1. The amount of raw material in the universe—the amount of sand, oil, and the number of atoms of carbon, oxygen, etc.—is                                 . And the number of ways of arranging and using these raw materials is .
    1. finite; also finite
    2. infinite; virtually infinite
    3. finite; virtually infinite
    4. virtually infinite; zero
    5. zero; infinite

 

 

  1. In economics, a rival good is one that
    1. cannot be consumed by more than two persons at a time.
    2. can be consumed by more than one person at a time.
    3. can be consumed by more than one person at a time but is congested.
    4. cannot be consumed by more than one person at a time.
    5. None of the above.

.

 

  1. In economics, a nonrival good is one that
    1. cannot be consumed by more than one person at a time.
    2. can be consumed by more than one person at a time.
    3. can be consumed by more than one person at a time but is congested.
    4. cannot be consumed by more than two persons at a time.
    5. None of the above.

.

 

52

 

  1. Which of the following are nonrival goods?
    1. a peanut butter sandwich
    2. orange juice
    3. a jacket
    4. All of the above.
    5. None of the above.

.

  1. Which of the following are nonrival goods?
    1. a TV signal
    2. a blueprint
 
  1. To get increasing returns to scale using the production function Yt = A±K 1/3L 2/3, we need to replace total factor productivity, A±,
    1.  

t         t

with more capital.
    1. with the flow of ideas, At.
    2. with the stock of ideas, At.
    3. with the number 2.
    4. with twice the factor productivity, 2 • A±.

 

 

  1.  

t

t

With the production function Yt = At K 1/3L 2/3, if we

 

    1. national defense
    2. All of the above.
    3. None of the above.

.

 

  1. If there are large fixed or research and development costs, such as in the pharmaceutical industry, production can characterized by
    1. negative costs.
    2. constant returns to scale.
 

double                , we have an increasing returns production.

      1. capital
      2. capital and the stock of ideas
      3. capital and labor
      4. capital, labor, and the stock of ideas
      5. labor and the stock of ideas

.

 

 

t

t

14. With the production function Yt = At K 1/3L 2/3, if we

 

    1. decreasing returns to scale.
    2. large variable costs.
    3. increasing returns to scale.

.

 

  1. If Y is a good’s output, X is spending producing a good, F±is the fixed cost associated with production, and C is is the average cost of production, which of the following production functions exhibits increasing returns?
 

double                , we have a constant returns production.

    1. capital
    2. capital, labor, and the stock of ideas
    3. capital and the stock of ideas
    4. capital and labor
    5. labor and the stock of ideas

.

 

  1.  

t

t

The production function Yt = AtK 1/3L 2/3, where At is the

 

    1. Y = (CX – F±)
    2. Y = (X – F)±• C
    3. Y = (F±– X)/C
    4. Y = (X – F±)/C
    5. Y = (X – F±C)

.

 

  1. Increasing returns to scale is characterized by
    1. constantly declining fixed costs.
    2. diseconomies of scale; that is, the average cost falls as output rises.
    3. economies of scale; that is, the average cost rises as output rises.
    4. diseconomies of scale; that is, the average cost is constant as output rises.
    5. economies of scale; that is, the average cost falls as output rises.

.

 

 

stock of ideas, Kt is capital, and Lt is labor, assumes

  1. At is rivalrous.
  2. At is nonrivalrous.
  3. Kt is nonrivalrous.
  4. Lt is rivalrous.
  5. At is fixed.

.

  1. The difference between total factor productivity (TFP) and the stock of ideas is that
    1. TFP grows and ideas are fixed.
    2. TFP is fixed and ideas can grow.
    3. TFP is nonrivalrous and ideas are not.
    4. TFP is rivalrous and ideas are not.
    5. There is no difference.

.

 

  1. If there are large fixed costs, due to research and development, perfect competition does not generate new ideas, because
    1. firms need to recoup these costs through higher profits.
    2. with monopolistic competition, prices are equal to the marginal cost plus a markup.
    3. with monopolistic competition, prices are equal to the marginal cost minus a markup.
    4. perfectly competitive firms always set prices lower than the marginal cost.
    5. Both a and b are correct.

.

 

  1. Because, in many industries, the cost of generating new ideas is so high, firms must
    1. charge a price equal to the marginal cost.
    2. charge a price higher than the marginal cost.
    3. charge a price lower than the marginal cost.
    4. charge a price equal to the average fixed cost.
    5. charge a price lower than the average fixed cost.

.

  1. In perfect competition, the price            ; and in a monopoly, the price .
    1. is zero; is positive
    2. is greater than the marginal cost; is equal to the marginal cost
    3. is less than the marginal cost; is greater than the marginal cost
    4. is equal to the marginal cost; is greater than the marginal cost
    5. is positive; is zero

.

 

  1. The markup is defined as
    1. the percentage of the price above the marginal cost that is used to recoup the costs of generating ideas.
    2. the percentage of the price below the marginal cost that is used to recoup the costs of generating ideas.
    3. the percentage of the price above the average cost that is used to recoup variable costs.
    4. the percentage of the cost above the marginal cost that is used to recoup the revenues of generating ideas.
    5. the percentage of the price below the marginal cost that is used to recoup the profits of generating ideas.

.

 

 
  1. With monopolistic pricing,           are needed to generate         .
    1. profits; capital
    2. costs; capital
    3. profits; new ideas
    4. variable costs; total factor productivity
    5. profits; total factor productivity

 

 

  1. The reason perfect competition cannot generate new ideas is that
    1. profits are positive.
    2. perfectly competitive firms have no ideas.
    3. profits are zero.
    4. firms are too small to generate ideas.
    5. revenues are positive.

 

 

  1. Which of the following can be used to give firms incentive to innovate?
    1. patents
    2. copyrights
    3. trade secrets
    4. higher taxes
    5. a, b, and c.

.

 

  1. Which of the following can be used to give firms incentive to innovate?
    1. patents
    2. copyrights
    3. prizes
    4. subsidies
    5. All of the above.

.

 

  1. The president of Tunisia asks you to suggest an idea to improve the economy’s growth without worrying about decreasing returns. You suggest
    1. paying a competitive wage.
    2. offering firms an incentive to produce new ideas.
    3. placing a higher tax on firms.
    4. removing legal protection for firms.
    5. None of the above.

.

 

  1. In the Romer model, two key goods are produced:
    1. a government good and new ideas.
    2. a consumption good and new ideas.
    3. a consumption good and total factor productivity.
    4. a consumption good and capital.
    5. None of the above.

.

  1. In the Romer model, the inputs to production are
    1. capital and labor.
    2. capital and ideas.
    3. labor and ideas.
    4. natural resources, labor, and ideas.
    5. labor and total factor productivity.

 

 

  1. In the Romer model, the production function Yt = AtLyt, where At is knowledge and Lyt is the amount of labor in the output sector,
    1. exhibits constant returns to labor and increasing returns to labor and knowledge.
    2. exhibits constant returns to labor and increasing returns to knowledge.
    3. exhibits increasing returns to labor and constant returns to labor and knowledge.
    4. exhibits decreasing returns to labor and constant returns to labor and knowledge.
    5. exhibits increasing returns to labor and increasing returns to labor and knowledge.

.

 

 
  1. In the Romer model, the more labor you dedicate to generating ideas        but       .
    1. the faster you accumulate knowledge; at a loss to current output in the consumption sector
    2. the faster you accumulate knowledge; at a gain to current output in the consumption sector
    3. the slower you accumulate knowledge; at a loss to current output in the consumption sector
    4. you do not accumulate knowledge; at a gain to current output in the consumption sector
    5. the more knowledge you lose; at a gain to current output in the consumption sector

.

 

  1. The production function in the Romer model is given by       , where g¯ is      .
    1.  

t t

yt = A k 1/3; the growth rate of capital
    1. yt = A0±(1 + g¯)t; the growth rate of knowledge
    2. yt = A0±(1 – l±); the growth rate of population
    3. yt = A0±(1 – l±)(1 + g¯)t; the growth rate of knowledge
    4. yt = A±(1 – l±)t; the growth rate of population

.

 

  1. In the Romer model, output is increasing in  and decreasing in      .
    1. the saving rate; the depreciation rate
    2. the research share; the growth rate of knowledge
    3. the growth rate of knowledge; the fraction of population in the ideas sector
    4. the growth rate of knowledge; the depreciation rate
    5. the saving rate; the growth rate of knowledge

 

 

 

 

 

 

  1. In the Romer model, if an economy allocates all of its labor to production,
    1. it will reduce output.

 

b. how good an economy is at generating knowledge.

c. labor’s wage.

.

 

 

 

 

  1. The production of new ideas in the Romer model is
    1. increasing in the efficiency of creating knowledge and the fraction of labor in research and development.
    2. decreasing in the efficiency of creating knowledge and increasing the fraction of labor in research and development.
    3. increasing in the efficiency of creating knowledge and decreasing in the fraction of labor in research and development.
    4. increasing in the population growth and capital accumulation.
    5. decreasing in the efficiency of creating knowledge and in the fraction of labor in research and development.

.

 

  1. In the Romer model, the growth rate of ideas, g¯, is increasing in
    1. the research share and the total population.
    2. the knowledge efficiency parameter and the research share.
    3. the knowledge efficiency parameter, the research share, and the total population.
    4. the knowledge efficiency parameter and the savings rate.
    5. the fraction of labor in research and development and the savings rate.

 

 

  1. In the Romer model, the ideas production function is given by
    1. DAt/At = l±.
    2. DAt = u¯ lN±/±At.
    3. DAt /At = u¯ l±.
    4. DAt /At = u¯ lg±¯.
    5. DAt /At = u¯ l±N.±

.

 

  1. If Canada and Taiwan have the same fraction of researchers and the same knowledge efficiency parameter, but Canada’s population is larger, then
    1. Taiwan has a higher per capita output growth rate.
    2. Canada has a higher per capita output growth rate.
    3. each country’s per capita output grows at the same rate.
    4. Canada has higher per capita income than Taiwan.
    5. Canada’s level of income is greater than Taiwan’s.

.

 
  1. Suppose the parameters of the Romer model take the following values: A0±= 100, l±= 0.05, u¯ = 1/100, and N±= 1,000. What is the growth rate of this country?
    1. 10 percent
    2. 40 percent
    3. 0.02 percent
    4. 2 percent
    5. 0.10 percent

.

 

  1. Suppose the parameters of the Romer model take the following values: A±0 = 10, l±= 0.01, u¯ = 1/500, and N±= 10,000. What is the growth rate of this country?
    1. 2 percent
    2. 20 percent
    3. 0.2 percent
    4. 10 percent
    5. 0.01 percent

.

  1. Suppose the parameters of the Romer model take the following values: A±0 = 10, l±= 0.01, u¯ = 1/500, and N±= 10,000. What is the number of researchers in this country?
    1. 20
    2. 1 million

c. 100

d. 0.10

e. 200

 

 

  1. Suppose the parameters of the Romer model take the following values: A±0 = 10, l±= 0.01, u¯ = 1/500, and N±= 10,000. What is the per capita income of this country in the first period, y1?
    1. about 1.19
    2. about 11.9
    3. about 12.0
    4. about 14.3
    5. about 9.9

.

 

  1. Suppose the parameters of the Romer model take the following values: A0±= 10, l ±= 0.01, u¯ = 1/500, and N±= 10,000. What is the per capita income of this country in the tenth period, y10?
    1. about 6.13
    2. about 61.3
    3. about 12.0
    4. about 11.9
    5. about 10.9

.

  1. Suppose the parameters of the Romer model take the following values: A0±= 10, l ±= 0.01, u¯ = 1/500, and N±= 10,000. What is the per capita income of this country in the initial period, y0?
    1. about 12.1
    2. about 11.9
    3. about 12.0
    4. about 1.19
    5. about 9.9

.

 

  1. If East and West Timor are identical in every way except that East Timor has fewer researchers,
    1. West and East Timor will grow at the same rate.
    2. East Timor should grow faster according to the Romer model.
    3. West Timor should grow faster according to the Solow model.
    4. West Timor should grow faster according to the Romer model.
    5. East Timor is smaller than West Timor.

.

 

  1. Suppose the Romer model parameters in East Timor are  A0±= 100, l±= 0.01, u¯ = 1/500, and N±= 10,000; while in North Timor they are  A0±= 10, l±= 0.001,

u¯ = 1/1,000, and N±= 200,000; then

    1. neither country grows.
    2. East Timor’s per capita income growth rate is 20 percent and North Timor’s is 1 percent.
    3. East Timor’s per capita income growth rate is 5 percent and North Timor’s is 0.05 percent.
    4. East Timor’s per capita income growth rate is 100 percent and North Timor’s is 1 percent.
    5. each country’s per capita income growth rate is 20 percent.

.

 

 
  1. Nonrivalry in the knowledge sector means that
    1. per capita income depends on the total population.
    2. per capita income depends on some of the stock of ideas.
    3. per capita income depends on the total stock of ideas.
    4. labor in the ideas sector also can be used in the output sector.
    5. all labor is used in the ideas sector.

 

 

  1. In the Romer model,            is the driving force behind sustained     economic growth.
    1. labor; long-term
    2. knowledge; short-term
    3. knowledge; long-term
    4. capital; short-term
    5. capital; long-term

 

 

  1. Idea accumulation in the Romer model exhibits
    1. increasing returns to capital.
    2. diminishing returns in the stock of ideas.
    3. negative returns in the stock of ideas.
    4. no diminishing returns in the stock of ideas.
    5. diminishing returns to labor.

.

 

  1. Because there are no diminishing returns in the stock of ideas in the Romer model,
    1. old ideas continue to contribute to current economic growth.
    2. economic growth can be sustained forever.
    3. the economy eventually reaches a steady state.
    4. economic growth eventually slows.
    5. a and b.

.

  1. In the Romer model, the Mexican economy
    1. never generates new ideas.
    2. does not need to generate ideas, as it can use those devised in the United States.
    3. cannot use ideas devised in the United States.
    4. eventually will reach a steady state.
    5. does not have an ideas sector.

.

 

  1. Nonrivalry in the Romer model means that ideas created
    1. can benefits only similar economies.
    2. can benefit only a few economies across the world.
    3. can be used only in the economy that devised them.
    4. can benefit virtually all economies across the world.
    5. do none of the above.

.

 

  1. A balanced growth path is defined as a situation in which
    1. the output growth rate is constant.
    2. the growth rates of all endogenous variables are variable.
    3. the growth rates of some of the endogenous variables are constant.
    4. the growth rates of all endogenous variables are constant.
    5. All of the above are correct.

.

 

  1. The parameter(s) in the Romer model is(are)
    1. the initial stock of ideas, the population, the fraction of population in the ideas sector, and the ideas efficiency parameter.
    2. the ideas efficiency parameter.
    3. the fraction of population in the ideas sector and the ideas efficiency parameter.
    4. the initial capital stock and the fraction of population in the ideas sector.
    5. the initial capital stock and the ideas efficiency parameter.

.

 

  1. In the Romer model in Figure 6.1, at time t0, a change in the growth rate of per capita output can be explained by
    1. an increase in the ideas efficiency parameter.
    2. an increase in the population.
    3. an increase in the research share.
    4. an increase in the savings rate.
    5. a and b.

.

 

Figure 6.1: Romer Model: Per Capita Output

PER CAPITA OUTPUT

 

 

 

 

 

 

 

 

 

 

 

 

 

t0                                YEAR

 

  1. In the Romer model in Figure 6.2, at time t0, a change in the shape of the production function can be explained by
    1. an increase in the population.
    2. an increase in the research share.
    3. an increase in the ideas efficiency parameter.
    4. an increase in the savings rate.
    5. a and b.

.

 

Figure 6.2: Romer Model: Per Capita Output

 

PER CAPITA OUTPUT

 

 

 

 

 

 

 

 

 

 

 

 

 

t0                       YEAR

 

  1. In the Romer model, if an economy’s population increases,
    1. output growth decelerates.
    2. output immediately increases and output growth slows.
    3. output immediately decreases and output growth slows.
    4. output immediately decreases and output growth accelerates.
    5. output growth accelerates.

.

 

  1. In the Romer model, if an economy’s research share decreases, there will be
    1. an immediate decrease in output and output growth slows.
    2. an immediate increase in output and output growth slows.
    3. an immediate increase in output and output growth accelerates.
    4. an immediate decrease in output and output growth accelerates.
    5. no change in output but output growth slows.

.

 

57. In the Romer model with decreasing returns to the knowledge sector,

    1. the transition dynamics appear very similar to those in the Solow model.
    2. an increase in the research share increases the growth rate in the short run.
    3. an increase in the research share increases the growth rate in the short and long runs.
    4. a decrease in the research share increases the growth rate in the short run.
    5. Both a and b are correct.

.

 

58.In the Romer model with decreasing returns to the knowledge sector,

    1. the number of researchers is irrelevant to long-term per capita income.
    2. more researchers produce more ideas, raising the long-run growth rate of per capita income.
    3. more researchers produce fewer ideas, raising the long-run growth rate of per capita income.
    4. more researchers produce more ideas, raising the long-run level of per capita income.
    5. more researchers cause the knowledge stock to contract.

.

 

 

 

 

  1. If there are decreasing returns to the ideas stock in the knowledge sector,
    1. the Romer model cannot explain sustained growth.
    2. the Romer model can explain an economy that reaches its steady state.
    3. the Romer model can explain sustained growth.
    4. the Romer model cannot explain why economies’ savings rates differ.
    5. the Romer model cannot explain why the output sector exhibits decreasing returns.

 

 

 

60. In the combined Solow-Romer model, long-run growth is sustained because of

    1. population growth.
    2. capital accumulation.
    3. the nonrivalry of ideas.
    4. total factor productivity.
    5. no capital depreciation.

 

 

  1. According to the combined Solow-Romer model,
    1. all countries grow at the same rate in the long run, but actual growth rates can differ across countries for long periods of time.
    2. all countries grow at the same rate in the medium and long runs.
    3. all countries grow at different rates forever.
    4. all countries grow at the same rate as the United States in each period.
    5. all countries grow at different rates in the long run, but actual growth rates are the same across countries for long periods of time.

.

 

 

  1. Defining the growth of variable zt as gz, in the combined Solow-Romer model, the growth rate of total output, using the standard production function, is given as
    1. gY = gA.

b. gY = gA + (1/3)gK + (2/3)gLy.

  1. gY = gA + (1/3)gK.
  2. gY = gA + gK + gLy.
  3.  

K

gY = gA + g 1/3 + gLy2/3.

.

  1. Defining the growth of variable zt as gz, in the combined Solow-Romer model, the growth rate of total output, using the production function

 

t

ty

Yt = AtKaL1–a, is given as
    1. gY = gA + agK.
    2. gY = gA.
    3. gY = gA + agK + (1 – a)gLy.
    4. gY = gA + gK + gLy.
    5. gY = gA ? agK ? (1 – a)gLy.

 

 

  1. Labor composition is used in “growth accounting” because
    1. it includes total number of hours worked.
    2. it can include changes in the age distribution of the labor force.
    3. it can include the educational attainment in the labor force.
    4. it measures how effective capital is per worker.
    5. a and b.

 

 

  1. “Growth accounting” endeavors to
    1. measure GDP.
    2. measure economic growth rates.
    3. determine how capital accumulates.
    4. measure what factors, and in what proportion, affect overall economic growth.
    5. measure global output and the proportion of global output attributed to each country.

.

 

  1. In the growth accounting equation,
 
  1. the contribution from capital; the (Solow) residual
  2. labor composition; the (Solow) residual
  3. educational attainment; labor composition
  4. None of the above.

 

 

  1. In growth accounting, the residual, gA, is so named because
    1. the economy is complicated.
    2. economists know exactly what contributes to growth.
    3. it is a way to measure observed TFP growth.
    4. it is a way to measure unobserved TFP growth.
    5. it measures labor composition.

.

 

  1. For the years 2004–2005, output per person in the private sector grew 2.1 percent; capital intensity grew

0.3 percent; and labor composition grew 0.1 percent. What was the growth rate of total factor productivity?

  1. 1.8 percent
  2. 2.5 percent
  3. 1.7 percent
  4. 0.4 percent
  5. Not enough information is given.

 

 

  1. For the years 1987–2005, output per person in the private sector grew 2.3 percent; capital intensity grew

0.9 percent; and total factor productivity grew 1.1 percent. What was the growth rate of labor composition?

  1. 1.2 percent
  2. 2.0 percent
  3. 0.4 percent
  4. 4.3 percent
  5. Not enough information is given.

 

 

  1. In growth accounting, if we subtract the capital intensity growth rate and the labor composition growth rate from the growth rate of output per person, we have
    1. the growth rate of total factor productivity.
    2. the residual.

 

g = (1/ 3)(g   − g ) + (2 / 3)(g

 

— g ) + g

 
    1. capital accumulation.

 

Y             K      L_,

A

 

           Ly    L ,   A

B              C

 
    1. savings.
    2. Both a and b are correct.

 

where gz is the growth rate of variable zt, B represents

                 , while C is called             .

a. labor composition; capital accumulation

 

.

 

 

  1. In the combined Solow-Romer model, an exogenous increase in the savings rate
    1. immediately increases the growth rate of per capita output, which eventually slows to its previous rate.
    2. immediately decreases the per capita output, but the growth rate does not change.
    3. increases the growth rate of per capita income, but eventually the economy reaches a new steady-state level of per capita output.
    4. immediately decreases the growth rate of per capita output, which eventually accelerates to a higher rate.
    5. has no impact on the growth rate or level of per capita output.

.

 

 

TRUE/FALSE—EXPLAIN

  1. New irrigation techniques are examples of idea(s).

 

  1. The signals of the TV show House are a rival good.

 

  1. The “idea” of the assembly line leads to increasing returns.

 

  1. The number of ideas is finite.
  2.  

t

t

The production function Yt = AtK 1/3L 2/3, where At is the

 

    1. pushes the economy’s growth rate of per capita output to infinity.
    2. pushes the economy to a new steady-state level of per capita output.
    3. has no impact on the growth rate or level of per capita output.

 

  1. In the combined Solow-Romer model, the total output growth rate
    • equals the growth rate of ideas.
    • is greater than the growth rate of ideas.
    • is lower than the growth rate of ideas.
    • equals the rate of capital depreciation.
    • is greater than the population growth rate.

 

  1. In the combined Solow-Romer model, the total output growth rate is greater than in the Romer model because
    • the savings rate is higher.
    • of population growth.
    • capital depreciation is zero.
    • of capital accumulation.
    • of a greater research share.

.

 

 
  1. stock of ideas, Kt is capital, and Lt is labor, assumes that At is rivalrous.

 

  1. There is no difference between the stock of ideas and total factor productivity.

 

  1. In monopolistic competition, the price is equal to the marginal cost.

 

  1. Offering inventors prizes is a way of providing an incentive to generate new ideas.
  2. In the Romer model, the more labor you dedicate to generating ideas, the more slowly you accumulate knowledge but at a loss to current output in the consumption sector.

 

 

  1. In the Romer model, the growth rate of knowledge is

g¯ = u¯ l±A±0.

 

14. Defining the growth of variable zt as gz, in the combined Solow-Romer model, the growth rate of total output, using the standard production function, is given as gY = gA ? (1/3)gK ? (2/3)gLy.

  1. In the growth accounting equation, gY = gA + (1/3)gK.

 

higher per capita output growth rate.

 

 

 

16. In the Romer model, the creation of capital is the driving force behind sustained long-term economic growth.

 

 

  1. In growth accounting, if we subtract the capital intensity growth rate and the labor composition growth rate from the growth rate of output per person, we have the growth rate of total factor productivity.

 

 

 

  1. The Romer model relies on increasing returns to ideas and labor.
  2. In the Romer model, if the population increases exogenously, the growth of knowledge stays constant.
  3. According to the combined Solow-Romer model, all countries grow at the same rate in the medium and long runs.

 

 

21 (2/3)gLy – gL), (2/3) + gA, where gz is the growth rate of variable zt, gA represents the growth rate of labor composition.

22. In the combined Solow-Romer model, an exogenous increase in the savings rate has no effect on the growth rate or level of per capita output.

 

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