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Hi, 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 where Â > 0
  • This 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 A3A4, … for Â > 0, so there is annual growth in the economy (since at steady state growth of capital = 0, and ŷ = Â)?

I am not sure if I have a wrong understanding of exogenous tech change. Would really appreciate some help!

KM
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