aNSWER ALL

Part C Human Capital and the Romer Model Consider the following standard Homer Model and a variation that includes human capital. Human Capital Goods Production Function K: = .4th Ideas Production Function AAH1 = iAgH 1L.\" Human Capital Production Function Ht : Lb; Resource Constraint Allocation of Labour 1. Explain what using labour to produce human capital implies for the economy? 2. Solve for the balanced growth path of output per capita in both models, showing all working. 3. Does the inclusion of human capital increase the rate of growth compared to the standard model? What is the impact on output in the short and long run? Discuss the solution of the Standard Dolow Model using the production function *+ = AK +" Held Where K+ + stock of Physical Capital Ht - stock of Human Lafital A - General Productivity Level Does there exist a unique I stable steady State ? If yes, then show it.QUESTION 3: (30 points) For the Solow model with human capital: a) Write the aggregate production function with human capital in terms of per effective worker variables. b) Derive an expression for the growth rate of output per worker and discuss the three sources of growth. c) Write the equations of the complete model. d) Derive the two Solow equations for the model. e) Solve for the steady state values of output per effective worker, physical capital per effective worker, and human capital per effective worker. f) Derive the steady state paths for output per worker and consumption per worker. g) Draw the Phase diagram for the Solow model with human capital