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Question: assume an economy is on a balanced growth path in...

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Assume an economy is on a balanced growth path in the Romer model, then, in the year 2030 research productivity rises immediately and permanently to a new level. 

 

(a) Solve for the new growth rate of knowledge and Yt. 

(b) Make a graph of Yt over time 

(c) What might cause research productivity to increase in an economy?

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