which country is considered the most innovative
united states
what is the solow residual model
gA=gY−αgK−(1−α)gL
where gy= output growth
alpha= capital share
gk= capital growth
gl= labour griwth
If output grows 6%, capital 5%, labour 2%, and α = 0.5, what is TFP growth?
2.5%
Why is R&D spending important for growth?
Drives technological progress
Creates new ideas
Has unlimited potential
→ All of the above
If technological progress increases, to keep capital per effective worker constant, what must happen?
A: Investment must increase
Because required break-even investment becomes:
(δ+n+g)k
g↑, required investment ↑.
If technology increases by 10%, how many workers are needed to produce the same output?
10% fewer workers
Because
AL must stay constant.
In an economy with population growth and technological progress, does output grow over time?
Yes (True)
Growth rate = n+g
A higher saving rate increases steady-state capital per effective worker and:
The growth rate of output per effective worker remains unchanged
Saving affects levels, not long-run growth.
Which is NOT a source of technological progress for developing countries?
Discovering new natural resources
In balanced growth with technological progress, does capital grow faster than population?
Yes (True)
Capital grows at n+g, population at n.
Since the 1980s, most of China’s output per worker growth is attributed to technological progress?
True (in growth accounting terms — TFP)
In the Solow model with technological progress, what does a higher saving rate increase?
steady state capital per effective worker k* and output per worker y*
does a higher saving rate change the long run growth rate
no, saving affects levels, not long term growth
Long-run growth of output per effective worker equals?
0
Long-run growth of output per worker equals?
g (technological progress)
Long-run growth of total output equals?
n + g
where n= population (labour) growth rate
g= technological progress rate
: How do you know a question includes technological progress?
its says “per effective worker”
In balanced growth, what grows at rate n+g?
K, Y, and AL
K= capital stock
Y= total output
AL= effective labour
In balanced growth, what grows at rate 0?
K/AL (which is capital per effective worker)
Y/AL (which is output per effective worker)
Does capital grow faster than population in balanced growth?
Yes (because n+g>n).
n= population (labour) growth rate
g= technological progress rate
If g (population) increases, what happens to break-even investment?
It increases:
(δ+n+g)k↑
If g (technological progress rate) increases and saving is unchanged, what happens to steady-state 𝑘∗
it falls
If g (technological progress rate) increases, what happens to long-run growth of output per worker?
it increases
To keep capital per effective worker constant when g (technological progress rate) rises, what must increase?
investment
