Question

11. The Ak-model of endogenous growth: Imagine that the marginal product of capital were constant, instead of being diminishing in capital. In particular, assume that y = Ak, where A is a positive constant, but that the rest of the model is the standard Solow model. Assume also that sA > n + d. (a) Plot production, saving and the maintenance curves in the same diagram. (b) Where can we observe ?k in the figure? (c) Use your figure to show what will happen to ?k over time. Graphically show how the steady-state capital level changes as capital grows. (d) Is it possible for capital accumulation to produce everlasting growth in this model? Explain. (e) Would countries that start with different capital levels converge in this model? Explain. 12. Alternative endogenous growth model: Imagine that total factor productivity z automatically grows as capital k is accumulated, as a result of new capital embodying new technology. Assume that the capital stock is initially below the steady-state level. (a) Graphically show how the steady-state capital level changes as capital grows. (b) Is it possible for capital accumulation to produce everlasting growth in this model? Explain. (c) Would countries that start with different capital levels converge in this model? Explain.

          11. The Ak-model of endogenous growth: Imagine that the marginal product of capital were constant, instead of being diminishing in capital. In particular, assume that y = Ak, where A is a positive constant, but that the rest of the model is the standard Solow model. Assume also that sA > n + d.
(a) Plot production, saving and the maintenance curves in the same diagram.
(b) Where can we observe ?k in the figure?
(c) Use your figure to show what will happen to ?k over time. Graphically show how the steady-state capital level changes as capital grows.
(d) Is it possible for capital accumulation to produce everlasting growth in this model? Explain.
(e) Would countries that start with different capital levels converge in this model? Explain.

12. Alternative endogenous growth model: Imagine that total factor productivity z automatically grows as capital k is accumulated, as a result of new capital embodying new technology. Assume that the capital stock is initially below the steady-state level.
(a) Graphically show how the steady-state capital level changes as capital grows.
(b) Is it possible for capital accumulation to produce everlasting growth in this model? Explain.
(c) Would countries that start with different capital levels converge in this model? Explain.

11. The Ak-model of endogenous growth: Imagine that the marginal product of capital were constant, instead of being diminishing in capital. In particular, assume that y = Ak, where A is a positive constant, but that the rest of the model is the standard Solow model. Assume also that sA > n + d.
(a) Plot production, saving and the maintenance curves in the same diagram.
(b) Where can we observe ?k in the figure?
(c) Use your figure to show what will happen to ?k over time. Graphically show how the steady-state capital level changes as capital grows.
(d) Is it possible for capital accumulation to produce everlasting growth in this model? Explain.
(e) Would countries that start with different capital levels converge in this model? Explain.

12. Alternative endogenous growth model: Imagine that total factor productivity z automatically grows as capital k is accumulated, as a result of new capital embodying new technology. Assume that the capital stock is initially below the steady-state level.
(a) Graphically show how the steady-state capital level changes as capital grows.
(b) Is it possible for capital accumulation to produce everlasting growth in this model? Explain.
(c) Would countries that start with different capital levels converge in this model? Explain.

Added by Raul G.

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