Question3 In the Romer model, output increases in the ________ and decreases in the ________. saving rate; depreciation rate growth rate of knowledge; depreciation rate saving rate; growth rate of knowledge growth rate of knowledge; fraction of population in the ideas sector research share; growth rate of knowledge ResetMaximum marks: 1 Flag question undefined

Question

BlackTom AI · Accepted Answer

First, let’s restate the question in our own words to focus on what is being asked: In the Romer model, identify the dimension along which output increases and the dimension along which it decreases.
Option A: saving rate; depreciation rate. Interpreting this, one would be claiming that higher saving raises output, while higher depreciation lowers output. While saving can influence investment and growth in some models, the Romer framework emphasizes knowledge creation and its growth dynamics more directly than the simple saving-depreciation trade-off for determining short-run output trends. This pairing is not the standard depiction of output responses in Romer’s endogenous growth setting.
Option B: growth rate of knowledge; depreciation rate. Here, increasing the growth rate of knowledge would plausibly raise aggregate output over time, since more rapid knowledge accumulation expands the stock of ideas driving production. Depreciation rate, when increased, reduces the effective stock or usefulness of existing knowledge, which would tend to decrease output or the growth of output. This aligns with the intuition that output growth is driven by knowledge creation, while depreciation erodes the existing knowledge stock.
Option C: saving rate; growth rate of knowledge. If output rose with a higher saving rate, that would be a traditional neoclassical channel via capital accumulation, but Romer-type models stress knowledge spillovers and R&D as the main engine of growth rather than mere saving-led capital deepening. While saving can influence long-run growth in some models, this pairing does not capture the characteristic Romer mechanism as cleanly as option B.
Option D: growth rate of knowledge; fraction of population in the ideas sector. Increasing the growth rate of knowledge is clearly a driver of higher output in Romer-like frameworks. However, tying output decreases to a reduction in the fraction of the population in the ideas sector is not the standard comparative-static result: more people in the ideas sector would typically boost knowledge growth, not reduce it. Thus this option misstates the mapping between knowledge dynamics and population structure.
Option E: research share; growth rate of knowledge. Elevating the research share can influence how much of the economy is devoted to R&D, which could affect knowledge growth, but the statement implies a direct, exclusive relationship between research share and output growth that is not as precise as the direct link between knowledge growth rate and output. Moreover, the Romer framework emphasizes the growth rate of knowledge itself as the primary driver, rather than the share of resources allocated to research per se as the sole determinant.
In summary, several options refer to saving, population composition, or resource allocation in ways that do not align with the Romer mechanism where output growth tracks the rate at which knowledge expands and output is hampered by the depreciation (or obsolescence) of existing knowledge. The pairing that reflects the core idea—output rises with faster growth in knowledge and falls with faster depreciation of the knowledge stock—best matches option B.

View Explanation

Log in for full answers

Similar Questions

Which of the following statement is true?

Question9 Which of the following is NOT an endogenous variable in the Romer model? output the fraction of the population engaged in research the stock of knowledge the number of workers engaged in research the level of capital ResetMaximum marks: 1 Flag question undefined

Question5 Which of the following is NOT an endogenous variable in the Romer model? the level of capital the stock of knowledge output the number of workers engaged in research the fraction of the population engaged in research ResetMaximum marks: 1 Flag question undefined

The difference between total factor productivity (TFP) in the Solow-Swan model and the stock of ideas in the Romer model is that

In the Romer model, if an economy allocates all its labor to production, it will

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler