QUESTIONS

Q$-1$: Specify and explain the Lucas model. Also comment on why it is an endogenous growth model. $(12$p$)$

$A^{}\frac{?}{b}=ar()*L_A\frac{,}{b}ar()=*e^v*A^{}$ lucas Roner think the $A$ is endogenas. Becoule the

$=>A^{}=.e^{},$ lucas warked an aduanced countries rot like neollossicals

The labor is allocated with ideas.

Q$-2$: Within the framework of the neoclassical growth model that incorporates human capital:

a$)$ Write the two fundamental equations: the production function and the capital accumulation equation. Specify

and explain the notation. $(8p)$

b$)$ Derive the state variables of capital $(widetilde(k))$ and of output

c$)$ Derive the steady$-$state values of widetilde$(k{)}^{**}$ and widetilde$(y{)}^{**}.$ Also, rewrite tilde$(y{)}^{**}$ in terms of output per worker and comment. $(10$p$)$

Q$-3$: Using a Cobb$-$Douglas type production function that contains a Hicks$-$neutral productivity term, derive

mathematically the "Solow residual". Explain what that residual is used to measure and what it says to us$?$ Also, how

do we interpret the "residual" as regards growth accounting? $(12$p$)$PLeasP