In his scathing czlitique of contemporary macroeconomic theory, Homer {EUl} calls technology that just magicallyf'exogenously improves over time as required to generate sustainable growth in the Solow model a modernday 'phlogiston'? In light of the fact that he had proposed a theory, in which technological advancements occur endogenously some 25 years earlier (Homer, 19m} and for which he would later receive the Nobel prize [in EDIE}, this is unsurprising. Now, the key equation in the Homer model discussed in class is the following, existing tec'llnlogy A 1?? 3H1: lszt] 3: HF; production which captures next periode level of technology n+1 as a function of current technology at and the fraction of the labor force N; that is employed in producing future technologyr l3. As such, the two parameters A :3- 1 which captures the marginal product of labor in producing new technologies and E (El, 1) which captures the marginal product of existing technology in producing new technologies are the two key parameters of the model. In fact, we found in class that all per-capita variables technology, output, capital, and consmnption grow at the rate .21.. ni-s, where n 3.:- 1 is the exogenous growth rate of the labor force. More generally, the primary 3This is in reference to the re-like element that was once thought to be contained within combustible bodies and released during combustion [turns out combustion is actually fueled by the oxygen in the surrounding air}. result of the Homer model is given by the following set of equations, 3, = we => 9; = as {RE} y, = gt???\" 9,, = n {av} k, = atm gt = we: {ELK} N: = Nani a: on = n {RN} which describe the models balanced growth path resulting from the endogenous technological response to population growth as captured by equation {HZ}. As you may recall from class, the parameters E = [33,33,3k} are rather convoluted {see handout}, but they are only of secondary importance.3 a} [2 points] Assuming n. :1 1, what happens to the growth rate of technology 9,, and percapita output 9,, when the e'iciency of technological production improves [.1 increases}? What happens when the contribution of old technologyr to new technologyr improves (ti: increases}? b} [3 points} Assuming n 2::- 1, why is the Homer model typically labeled an endogenous growth model? (Hint: recall that the Solow model belongs to the class of exogenous growth models because absent any exogenous technological advancements, capital, output, and consumption all converge to a steady state.} c} [5 points} What happens to technology and output {growth} if n