Exogenous increase in technology

by | Jun 10, 2021 | Assignment

I am studying neoclassical growth theory and want to clarify what an exogenous increase in technology, A, means. (Please correct me if I’m wrong):When A1 increases to A2, technological growth is positive.

 > 0This will cause the production function curve to shift up to where y = f(k, A2)So when the economy reaches steady state at A2, does that mean that technological growth is zero, Â = 0, again until there is another exogenous increase of A?

What is happening in the economy as it is trying to reach to a new steady state with A2? Does this mean that there must always be exogenous increases of A to A3, A4, … for Â > 0, so there is annual growth in the economy (since at steady state growth of capital = 0, and ? = Â)?

I am not sure if I have a wrong understanding of exogenous tech change.

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