Question

please answer the question

7. (1 point) Suppose we have two economies - let's call them Earth and Mars-that are identical, except that one begins with a stock of ideas that is twice as large as the other: Abarth = 2 x Alar: The two oconomies are so far apart that they don't share ideas, and each evolves as a separate Romer economy. On a single graph (with a ratio scale), plot the behavior of per capita GDP on Earth and Mars over time. What is the effect of starting out with more knowledge?

Answer 1

Solution: (7) Given, we have a conomies of Earth and mars. . Both are identical except that one begins with a Stock of ideas that is twice as large of the other. nearth = a* A mars. • Tho economies are far apart and donot share ideas, each evolves a seperate Romes economy. per capita Gop on earth and 7 Graph of behaviour of mars over time is: Mars output Earth time

Effect of starting out with more knowledge: The consequence of starting out with larger stock of Heas is that inhibitants of Earth will enjoy better standarts of living og compared to in hibitants of mars. : people will have higher output per capita as shown in the -figure. - o