2)a.In our work thus far with the Romer model we have used a production function for...

 

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2)a.In our work thus far with the Romer model we have used a production function for ideas given by: dA di form: da = = aNRA. Suppose we alter the production function for ideas and write it in the following aNRA,0 <0 < 1. Explain the economic meaning of λ. Why might it make sense to assume that 0 < > < 1? b. Using our new production function for ideas, find the equation for the growth rate of technology. c. Using our new production function for ideas, find the steady-state value for the growth of technology. Explain how you arrived at this equation. d. Using your answer from part c, explain how a change in each of the elements in your equation affect the steady-state value for the growth of technology. Why do these changes make economic sense? e. Suppose the growth rate of population increases. Assuming that SR and Sy are constant, what must happen to the growth rate of researchers,gN,? f. Using the Solow diagram, what will happen to the steady-state values of and ANY when the growth rate of the population increases? ANY g. What will happen to the growth rate of the standard of living, as a result of the increase in the growth rate of the population? 2)a.In our work thus far with the Romer model we have used a production function for ideas given by: dA di form: da = = aNRA. Suppose we alter the production function for ideas and write it in the following aNRA,0 <0 < 1. Explain the economic meaning of λ. Why might it make sense to assume that 0 < > < 1? b. Using our new production function for ideas, find the equation for the growth rate of technology. c. Using our new production function for ideas, find the steady-state value for the growth of technology. Explain how you arrived at this equation. d. Using your answer from part c, explain how a change in each of the elements in your equation affect the steady-state value for the growth of technology. Why do these changes make economic sense? e. Suppose the growth rate of population increases. Assuming that SR and Sy are constant, what must happen to the growth rate of researchers,gN,? f. Using the Solow diagram, what will happen to the steady-state values of and ANY when the growth rate of the population increases? ANY g. What will happen to the growth rate of the standard of living, as a result of the increase in the growth rate of the population?