Question: Question 1 (16 points) The aggregate production function in the Romer model describes how the capital stock, K, and labor, Ly, combine to produce

Question 1 (16 points) The aggregate production function in the Romer model describes how the capital stock, K, and labor, Ly, combine to produce output, Y, using the stock of ideas, A: YK" (ALy) (1) O 0 < a < 1. o L-Ly + LA=(1-SR)L+SRL (labor force to produce output + labor force to produce ideas). O SR is a constant fraction of the labor force. Labor grows exponentially at some constant and exogenous rate: = n o Along a balanced growth path,

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Lets break down the questions one by one 1 From equation 3 explain why the rate of technological progress along the balanced growth path g equals the labor force growth rate gL 2 points From equation ... View full answer

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