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    Question

    According to the Romer model, if the stock of ideas

    increases by 15 %, how much will output per worker increase when all else is equal?
    A 5% Correct Answer Incorrect Answer
    B 10% Correct Answer Incorrect Answer
    C 15% Correct Answer Incorrect Answer
    D 20% Correct Answer Incorrect Answer

    Solution

    formula for basic production function, according to Romer is as: Yi= AKiαLi1-αK-ß Now other things is equal, one unit change in A (idea/technology) will increase the output by 1 [dy/dA = 1]. Hence output will increase by 15% if the stock of idea increses by 15%.

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