Answer to Question #143311 in Economics for Crystal D Surujdeo

Question

Consider the Romer economy with the following parameter values: initial knowledge level A0=10, 3% of the workforce is employed in research sector, research productivity is z=1/2,000 and the workforce equals 1,000.
Innovation rate= 1.5%

Compute per-capita GDP in year 100 (that is, 100 years later). Pick the closest value.
a. 681
b. 112
c. 43
d. 11

Answer 1

If the innovation rate is 1.5%, then the GDP per capita in year 100 is: $10×(1 + 0.015)^{100} = 44.$

So, the closest value is c. 43.