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

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In the Romer model, long-run growth is driven by the accumulation of ideas, which comes from allocating labor to research and development activities rather than to production alone.
Option a: "reduce output." If all workers are put to production, current output is maximized given the capital stock, but there is no mechanism in Romer that says this allocation necessarily reduces output in the present period. The question is about ideas generation and long-run growth, not immediate output, so this statement is not the central implication of allocating all labor to production.
Option b: "reduce the number of ideas it generates." If every worker is devoted to producing output and none to research, there is no labor left for idea creation. Therefore, this option asserts a reduction in ideas, which is true in a direct sense, but it is effectively describing the same outcome as option d in a different phrasing. However, the phrasing here focuses on a change in the quantity of ideas relative to some baseline rather than the absolute fact that zero ideas would be produced when all labor is in production. The precise standard answer emphasizes that ideas generation stops entirely, which is captured more directly by option d.
Option c: "increase the number of ideas it generates." This is incorrect because sending all labor to production leaves no labor for R&D, so the model would not generate more ideas; ideas generation would not increase under full production allocation.
Option d: "not generate any ideas." This is the key implication: with all labor allocated to production, there is no remaining labor for research, so the economy does not generate new ideas in Romer’s framework, leading to no growth from ideas in that period.
Option e: "None of these answers is correct." Since option d correctly states that no ideas are produced when all labor goes to production, this option is false.
In summary, the central logic is that Romer’s idea-driven growth requires labor applied to research; eliminating that channel by allocating all labor to production yields zero new ideas, which makes option d the correct description of the outcome. Other options misstate the effect or rely on subtleties that do not align with the core mechanism of idea generation in the model.

ECON2102-Macroeconomics 2 - T3/2025

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

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