Question

A change in which of the following can change the long−run growth rate of the economy...

A change in which of the following can change the long−run growth rate of the economy in the Romer​ model?

A.the national saving rate

B.the fraction of the population engaged in and the productiveness of research and development

C.government spending and tax rates

D.investments in public infrastructure

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Answer #1

the answer is (b) the fraction of the population engaged in and the productiveness of research and development

Romer growth model is an endogenous growth model unlike the Solow model. The growth depends on technological growth, but technological growth depends on the number of people involved in research as well as past technology (standing on the shoulders of giants). Thus, (b) is right.

All other options are incorrect as they are not part of the technology function in the Romer growth model and hence do not impact long run growth.

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