In the Romer Model, with Decreasing Returns to the Knowledge

question 88

Multiple Choice

In the Romer model, with decreasing returns to the knowledge sector:

• A) the transition dynamics appear very similar to those in the Solow model.
• B) an increase in the research share decreases the growth rate in the short run.
• C) an increase in the research share increases the growth rate in the short and long runs.
• D) a decrease in the research share increases the growth rate in the short run.
• E) There are no level effects.

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Definitions:

Bond Dealers

Entities that trade in bond securities, acting as intermediaries between buyers and sellers in the bond market.

Default Risk Premiums

Additional returns that investors demand from a security issuer to compensate for the risk of default.

Treasury Bond

A government-issued debt instrument with a guaranteed interest rate, intended for long-term investment, with a maturity period exceeding ten years.

Boeing

A multinational corporation based in the United States that specializes in designing, manufacturing, and marketing airplanes, helicopters, rockets, satellites, and telecommunications gear.