Sample Long Question (next page) 3) Economic Growth: Consider the Basic growth model from your text and lecture as defined below: Production function: GDP = f(At Ko L.); where capital (K) and labor (L) are substitutes and technology (A) aids production Demographic Behavior: Lu+1= L:(1+n) = Nu+1; where n is the population growth rate, N is the total population and there is no unemployment Capital and Savings/Investment Dynamics: Kr+1 = It + Ki(1-8); It = S: = s*Y; where 6 is the depreciation rate of capital, s is the savings rate and investment is I. Technology Change: At+1= A-(1+1); where A is the constant growth rate of technology Suppose output would be Y*1 in the next period if nothing changed. Part 1: Now suppose that the parameters (6, 2, 6, n ) of the model change in the ways described below. For each outcome listed, determine whether the Y1 that would result under the new parameters is larger, smaller, or of unknown sign compared to Y*1. a) GDP i. Increase in 6 ii. Increase in A b) GDP per capita i. Increase in 6 ii. Increase in n