Question

The Romer model predicts that a decrease in the population will have a (positive or negative or no) level effect and a (positive or negative or no) growth effect on output per person.

( ) level effect

( ) growth effect on output per person

Answer 1

Negative level effect; positive growth effect on output per person.
Romer model explains the endogenous growth model which resulted through technical development and progress. This will provide long run growth in output per worker. The long run economic growth was depends on population growth and capital accumulation; the increasing population will increase the labour supply and this acquired capital can be efficiently used for the higher productivity of the increasing number of workers. The policy measures of government comprises of the long run productivity growth. For example, the promotion of research and skilled based education among the increasing population will increase the number of skilled labours in the economy. Thus the economy will introduce new technologies for higher level of production. Thus the long run economic growth will ensure under this situation.