Question
Exercise 9. Where growth comes from according to the Solow model and according to growth accounting Assume that some economy behaves completely in accordance with
Exercise 9. Where growth comes from according to the Solow model and according to growth accounting Assume that some economy behaves completely in accordance with the steady state of the Solow model presented in this chapter, where the assumed growth rate of At is g. From what you have learned in this chapter, what will the average annual growth rates of y kt and A, be over some period from year t to year T? What creates growth in GDP per worker? If one did a growth accounting exercise for this economy, what would be the fractions of growth in GDP per worker attributed to growth in capital per worker and to growth in At, respectively? Again, what is the true source of growth in this economy?
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