5. [Post-Keynesian Growth Model] Consider a two-region nation similar to Italy. In the North the elasticity of regional exports with respect to world demand () is 2.0 and the elasticity of regional imports with respect to regional income () is 1.0. In the South the elasticity of regional exports with respect to world demand () is .5 and the elasticity of regional imports with respect to regional income () is 1.0. The long-run growth rate of the world economy (Z*) is 4%.

a. What is the post-Keynesian model prediction of the long-run growth rate of exports (X*) in the North?

b. What is the post-Keynesian model prediction of the long-run growth rate of exports (X*) in the South?

c. What are the growth rates in income (Y*) for each region? Which region has a higher growth rate (Y*)?

d. If the North has an annual population growth rate of 1% and the South has an annual population growth rate of 2%, what are the per capital growth rates of North and South? Are the regions converging?