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We argued that if people could accumulate human as well as

 We argued that if people could accumulate human as well as physical capital, the production function

would look like the ?AK? production function.

  (a) If the production function is AK and the savings rate is constant at rate ?s?, and the rates of

depreciation and population growth are d  and n respectively, what would the growth rate of the economy


  (b) What would be the macroeconomic consequences of increasing the savings rate in this economy?

  (c) What would be the consequences of a decrease in fertility in this economy?

  (d) Would the consequences of decreasing fertility be UNAMBIGUOUSLY GOOD?

  (e) Can human capital grow without bounds? Explain why or why not (make sure you discuss the physical

nature of human capital).

  (f) What is the growth rate of the economy (in the absence of technological progress) if human capital

cannot grow without bounds?


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