6) Based on the AK Model of Endogenous Growth how do you expect covid-19 to affect economic growth (compared to a situation without those transfers)?

Endogenous Growth Theories Possible solutions: Big Push The AK Model (one of many) External in Human Capital (HK) . HK exhibits externalities: an increase in HK offsets diminishing marginal returns to physical capital Investment is possible in physical or human capital . No diminishing returns to total capital . No convergence predicted (Y=AK) A=total factor productivity, K= (physical) capital + human skills Y=AK where K includes both physical and human capital with I = S -> then 1 = AK+ SK=SY=SAK AK/K=SA=S and AY/Y=AA/A+AK/K I=S sK+AK= SAK (Y) can get us to the growth rate of capital (how fast is capital growing) AK=SAK-sK divided by K AK/k = sA-S (growth rate of capital) Y = AK (AY/Y = AA/A + AK/K) - higher economic growth Economic Growth Theories Results: . Growth as a consequence of the long run equilibrium . Growth depends on savings rate, depreciation rate, productivity, and productivity growth