ps7ans - ECON 305: INTERMEDIATE MACROECONOMICS SPRING 2008...

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ECON 305: INTERMEDIATE MACROECONOMICS SPRING 2008 MARK MOORE PROBLEM SET 7: SOLUTIONS A. CHAPTER 12 1. a. True. b. True. c. False. d. True. e. False. f. True. g. False. h. False. 2. a. Most technological progress seems to come from R&D activities. See discussion on fertility and appropriability in Chapter 12.2. b. More appropriability. More R&D. Perhaps a higher rate of technological progress, if R&D fertility remains high and the adoption of new technologies does not slow too much because of the higher cost. Since rich countries already have relatively strong patent protection, probably an increase in the rate of technological progress for rich countries. The effect is less clear for poor countries, who may find it too costly to adopt new technologies. c. Increase in R&D spending. If fertility does not fall, there will be higher technological progress and a higher rate of output growth. d. A decrease in the fertility of applied research; a (small) decrease in growth. e. A decrease in the appropriability of drug research. A drop in the development of new drugs. Lower technological progress and lower growth. 3. If the transition is not financed by borrowing, a shift to a fully funded system should increase output per worker in the long run. It should have no effect on the long run growth rate of output per worker. 4. See discussion in Chapter 12.2. 5. a. Both lead to an initial decrease in growth. b. Only the first leads to a permanent decrease in growth. 6. a. Year 1: 3000; Year 2: 3960
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b. Real GDP= 3300; growth rate of real GDP=10% c. 20% c. Real GDP/Worker=30 in both years; labor productivity growth is zero. e.
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This note was uploaded on 09/14/2008 for the course ECON 305 taught by Professor Dekle during the Spring '07 term at USC.

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ps7ans - ECON 305: INTERMEDIATE MACROECONOMICS SPRING 2008...

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