Part A: Macrodynamics and Growth Answer One questions only from this section 1. Consider the simple endogenous growth model where the only inputs into production are labour and knowledge. (a) Assuming there are decreasing returns to scale to knowledge in the production of knowledge, derive the equilibrium growth rate in this model. lllustrate by means of a diagram. [15 marks] (b) Now assume that there are constant returns to knowledge in the R and D sector. Derive the equilibrium growth rate of knowledge in this case. [15 marks] (c) Does an increase in the R and D share have different implications in (a) and (b)? Explain. [10 marks] (d) What are the types of distortions that typically affect the share of resources allocated to R and D? Explain briefly. [10 marks] [50 marks total] Indicative ans: Please consult the lecture notes on \"New Growth Theory\" where all of these parts are discussed and analysed