# answer to exercises 11&12 - Chapter 11...

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Chapter 11 6. a. K / N =( s /(2 δ )) 2 ; Y / N =s/(4 δ ) b. C / N =(1- s ) Y / N = s (1- s )/(4 δ ) c-e. Y / N increases with s . C / N increases until s =0.5, then decreases. 7. a. Yes. b. Yes. c. Yes. d. Y / N = ( K / N ) 1/3 e. In steady state, sY //N = δ K / N , which, given the production function in part (d), implies K / N =( s / δ ) 3/2 f. Y / N =( s / δ ) 1/2 g. Y / N = 2 h. Y / N = 2 1/2 8. a. Substituting from problem 7 part (e) implies K / N =1. b. Substituting from problem 7 part (f), Y / N =1. c. K / N =0.35; Y / N =0.71 d. K / N Y / N t 1.00 1.00 t +1 0.90 0.97 t +2 0.80 0.93 t +3 0.71 0.89 Chapter 12 2. a. Most technological progress seems to come from R&D activities. See discussion on fertility and appropriability in Chapter 12.2. b. This proposal would probably lead to lower growth in poorer countries, but higher growth in rich countries. c. This proposal would lead to an increase in R&D spending. If fertility did not fall, there would be an increase in the rates of technological progress and output growth.

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d. Presumably, this proposal would lead to a (small) decrease in the fertility of applied research and therefore to a (small) decrease in growth. e. This proposal would reduce in the appropriability of drug research. Presumably, there
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