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CHAPTER 9 Economic Growth II: Technology, Empirics, and Policy | 269 7. This question asks you to analyze in more detail the two-sector endogenous growth

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CHAPTER 9 Economic Growth II: Technology, Empirics, and Policy | 269 7. This question asks you to analyze in more detail the two-sector endogenous growth model e. Using your graph, show the impact of an presented in the text. increase in u. (Hint: This change affects both a. Rewrite the production function for manu- curves.) Describe both the immediate and the steady-state effects. factured goods in terms of output per effect tive worker and capital per effective worker. f. Based on your analysis, is an increase in w an unambiguously good thing for the economy? b. In this economy, what is break-even invest- Explain. ment (the amount of investment needed to 8. Choose two countries that interest you-one keep capital per effective worker constant)? rich and one poor. What is the income per per- c. Write down the equation of motion for k, son in each country? Find some data on country which shows Al as saving minus break-even characteristics that might help explain the dif- investment. Use this equation to draw a graph ference in income: investment rates, population showing the determination of steady-state k. growth rates, educational attainment, and so on. (Hint: This graph will look much like those (Hint: The Web site of the World Bank, http:// we used to analyze the Solow model.) www.worldbank.org, is one place to find such data.) How might you figure out which of these d. In this economy, what is the steady-state factors is most responsible for the observed growth rate of output per worker Y/L? How income difference? In your judgment, how use- do the saving rate s and the fraction of the ful is the Solow model as an analytic tool for labor force in universities u affect this steady- understanding the difference between the two state growth rate? countries you chose? For any problem marked with @ LaunchPad, there is a Work It Out online tutorial available for a similar problem. To access these interactive, step-by-step tutorials and other resources, visit LaunchPad for Macroeconomics, 9e at www.macmillanhighered.com/launchpad/mankiwge

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