Think of an economy that uses a non-renewable resource, X, as part of production. It extracts...

 

Transcribed Image Text:

Think of an economy that uses a non-renewable resource, X, as part of production. It extracts an amount E to use in production, and E₁ = SxX, where 5x is the extraction rate. The production function is Y₁ = K₂E³₁(A₁L₂) ¹-α - B. At time zero this economy experiences a permanent increase in the extraction rate. Select all of the following that would occur, based on the model from the Study Guide. The capital/output ratio along the balanced growth path remains the same. The level of productivity, A, will be permanently higher in the long run. The economy will run out of resources eventually. The level of GDP per capita at time zero is higher population growth rate must fall. 0 0 0 0 0 The Resources per capita, x, decline at a faster rate than before. The growth rate of GDP per capita along the balanced growth path is higher than before GDP per capita will eventually be lower than it would have been if the increase in the extraction rate had never occurred. Think of an economy that uses a non-renewable resource, X, as part of production. It extracts an amount E to use in production, and E₁ = SxX, where 5x is the extraction rate. The production function is Y₁ = K₂E³₁(A₁L₂) ¹-α - B. At time zero this economy experiences a permanent increase in the extraction rate. Select all of the following that would occur, based on the model from the Study Guide. The capital/output ratio along the balanced growth path remains the same. The level of productivity, A, will be permanently higher in the long run. The economy will run out of resources eventually. The level of GDP per capita at time zero is higher population growth rate must fall. 0 0 0 0 0 The Resources per capita, x, decline at a faster rate than before. The growth rate of GDP per capita along the balanced growth path is higher than before GDP per capita will eventually be lower than it would have been if the increase in the extraction rate had never occurred.

Answer rating: 100% (QA)

ANSWER Capital output ratio along the path of balanced growth remains the same The e... View the full answer