Question: I want the FULL ANSWER please. Question 4 Consider a n economy where the population o f country i N i , t grows a

I want the FULL ANSWER please.
Question 4
Consider an economy where the population of country iNi,t grows at the constant rate ni0 :
Ni,t+1=(1+ni)Ni,t.
Output is a linear function in aggregate productivity Ai,t and population Ni,t :
Yt=Ai,tNi,t,
The productivity of country i evolves according to:
Ai,t+1-Ai,t=Ai,tNi,t,
with >0,>0, which reflects the notions that a larger population generates more produc-
tive ideas (hence productivity growth is increasing in population) and that existing ideas beget new
ideas (hence productivity growth is increasing in current productivity).
(a) Characterize the long-run growth rate of productivity Ai,tof a country i first for the case of
==1 and then for the case ,1.
(b) Consider two countries iin{1,2}in the model under the parameter restrictions =0.5,
=1.In period 0, country 1 has twice as many people as country 2,N1,0=2N2,0, but only
a quarter of the productivity, A1,0=14A2,0. The population growth rates of the countries are
identical, n1=n2. How do the growth rates of productivity of the two countries compare in
the initial period (from period 0to1)? How do the growth rates compare in the long run (i.e.,
the balanced growth path)? How do the levels of productivity compare in the long run?
I want the FULL ANSWER please. Question 4

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