term 2 lecture 2 - technological progress

Question 1

for a basic solow model how would an improvement in technological progress mean

Answer 1

it would mean an increase in the total factor productivity or the parameter A. this will shift the production function

Question 2

what is neutral technological change>

Answer 2

a neutral technological change improves the productivity of both capital and labour

Question 3

if the marginal productivity of labour and capital change in the same proportion after technological progress, what occurs to the MRTS?

Answer 3

the marginal rate of technical substitution remains unchanged

Question 4

what occurs to the MRTS when the increase in marginal productivity of capital is relatively greater than MP of labour.

Answer 4

the marginal rate of technical substitution decreases as better technology is equivalent to having more capital in the economy

Question 5

what occurs to the MRTS when the increase in marginal productivity of capital is relatively smaller than marginal productivity of labour

Answer 5

the marginal rate of technical susbtitution is growing as better technology is equivalent to having more labour in the economy

Question 6

what type of technological progress does the extended solow model use?

Answer 6

it uses labour augmenting technological progress which means that any technological improvements work as if the number of workers in the economy would be augmented

Question 7

what is the equation for the production function for the extended solow model?

Answer 7

Y=F(K, E*L) where E is a variable which captures improvements in labour productivity as a result of technological advances (efficiency of labour)

Question 8

is the efficiency of labour growth rate exogenously or endogenously decided?

Answer 8

it is exogenously decided and ti grows at a rate of e^(g_E[t])

Question 9

in the solow model, what is the only way permanent economic growth can occur>

Answer 9

it can only occur from the sustained improvements in technology

Question 10

what is the issue of technological improvements in the solow model?

Answer 10

ithe technalogical improvements are exogenously given so there are no endogenous mechanisms of technological progress in this mode;

Question 11

what is the dynamics of output per worker along the BGP determined by?

Answer 11

it is determined by the savings rate, the population growth rate, the depreciation growth rate and by both the level and growth rate of technologies