Answer to Question #283642 in Economics for Sal

Question

Choose the best answer to each

question.

Consider a Solow growth model with the

following production function:

Y-FiX.L) - K0.3 (AL) 0.7

(1) If A = 2, L= 20.000, and K = 400, what is output?

(2) Does this production function have constant

returns to scale? Explain.

(3) Suppose the labor force grows by 5% so that it is

now 21.000. By how

much does output increase?

(4) Starting again with the conditions in part (1),

what if capital increases by

5%, so that it is now 420. By how much does

output increase?

For each pair listed below, i) explain the meaning

and significance of both terms, and il) briefly

explain the relationship between the two terms.

(1) the center; the periphery

(2) steady state, Golden-rule steady state

(3) convergence; conditional convergence

(4) TP; growth accounting equation

Discuss some limitations of the following three

models

(1) the Lewis model

(2) Dependency theory

(3) Slow model

Answer 1

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