Analysis Assignment 5
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Analysis Assignment: Chapter 6
Numerical problems
Over the past 20 years an economy’s total output has grown from 1000 to 1300, its capital stock
has risen from 2500 to 3250, and its labor force has increased from 500 to 575. All
measurements are in real terms. Calculate the contributions to economic growth of growth in
capital, labor, and productivity.
a)
Assuming that b)
Assuming that Analytical problems
Question 1
Suppose policy makers wish to increase steady state consumption per worker. Explain what must
happen to the saving rate to achieve this objective.
Question 2
According to the Solow model, how would each of the following affect consumption per worker
in the long run (that is, in the steady state)? Explain and use a graphical representation when necessary
a)
The destruction of a portion of the nation’s capital stock in a war.
b)
A permanent increase in the rate of immigration (which raises the overall population growth rate).
c)
A permanent increase in energy prices.
Working with Macroeconomic Data
For data to use in these exercises, go to the Federal Reserve Bank of St. Louis FRED database at:
https://fred.stlouisfed.org/
and the www.bea.gov
for data.
This time around you will need to download the data to excel and manipulate/ transform
the data the data to get the answers. Furthermore you will create your own graphic.
Question 1
This problem asks you to do your own growth accounting exercise. Using data since 1960, make
a table of annual growth rates of real GDP, the capital stock (private fixed assets from the Fixed
Assets section of the BEA website, www.bea.gov
, Table 6.2
), and civilian employment
.
Assuming that Find the productivity growth rate for each year.
a)
Graph the contributions to overall economic growth of capital growth, labor growth, and
productivity growth for the period since 1960. Contrast the behavior of each of these
variables in the post–1973 period to their behavior in the earlier period.
b)
Compare the post–1973 behavior of productivity growth with the graph of the relative
price of energy, shown in Fig. 3.11. To what extent do you think the productivity
slowdown can be blamed on higher energy prices?
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Can you help me with this please,
Thank you!
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Economic growth and Production Function Practice
1) The following values relate to the countries below for the following 3 years in
terms of Real GDP:
Years
Canada
1.722 trillion
1.742 trillion
Tajikistan
7.765 billion
Netherlands.
913.6 billion
2018
2019
8.301 billion
907.1 billion
2020
1.643 trillion
8.194 billion
912.2 billion
a) Calculate the Real gdp growth rate for each country and between the following 2
periods (2018-2019 and 2019-2020)
b) State how long it will take for each country in 2020 in order to double their levels
of real gdp.
c) Which country is more likely to achieve economic growth faster? why do you
think this is?
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Korea. Over the last 60 years or so, Korea has been one of the most successful economies in the world. What are the sources of this success? Consider the following data:
GDP per capita is expressed in 2017 US dollars. Population and employment are in millions of heads. Capital is in thousands of dollars. Education is a human capital index based on the average years of schooling.
(a) Compute the (average continuously compounded) growth rate of GDP per worker.
(b) Use our growth accounting methodology to allocate growth in output per worker to TFP, capital per worker, and human capital. What factors are most important?
(c) What is the growth rate of GDP per capita? How does it differ from growth in output per worker? Why?
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5. Suppose that the economy's production function is
Y = √KVLA
where K is capital, L is labor, and A is the state of technology.
Suppose that the saving rate (s) is equal to 2.4%, the rate of depreciation of capital (6)
is equal to 3%, the number of workers grow at 0.7% per year and the rate of
technological progress is 3%.
(a) Find the steady state values of:
iv.
v. growth rate of output
growth rate of output per worker
(b) Suppose that the growth rate of workers decreases. What is its short-run and the long-run
effect on the growth rate of output per worker ?
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7. Suppose that the economy's production function is
Y = √K√LA
where K is capital, L is labor, and A is the state of technology.
Suppose that the saving rate (s) is equal to 6%, the rate of depreciation of capital (8) is
equal to 5%, the number of workers grow at 5% per year and the rate of technological
progress is 4%.
(a) Find the steady state values of:
iv. growth rate of output per worker
growth rate of output
v.
(b) Suppose that the saving rate increases. What is its short-run and the long-run effect on
the growth rate of per-capita output?
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The economy has grown by 4% per year over the past 30 years. During
the same period, the labor force has grown by 1% per year and the
quantity of physical capital has grown by 5% per year. Each 1%
increase in physical capital per worker is estimated to increase
productivity by 0.4%. Assume that human capital has not changed
during the past 30 years. What is the growth rate of productivity?
A) 5%
B) 4%
C) 3%
D) 1.6%
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5. Suppose that the economy's production function is
Y = √K√LA
where K is capital, L is labor, and A is the state of technology.
Suppose that the saving rate (s) is equal to 2.4%, the rate of depreciation of capital (8)
is equal to 3%, the number of workers grow at 0.7% per year and the rate of
technological progress is 3%.
(a) Find the steady state values of:
i.
11.
capital stock per effective worker
output per effective worker
growth rate of output per effective worker
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Can you help me with this question please. Thank you!
All help is hugely appreciated.
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Graphical
4. Plot production function, savings function, and depreciation function in a slow model and
graphically show the effects (transition) of steady state capital in following situations:
(a) Contractionary monetary policy ⇒ real interest rate increases increased level of savings.
(b) Increase in the population growth rates.
(c) Increase in the technology parameter.
[Note: Graphs without proper labels will not get full credit.]
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Q)Consider three economies,each of which has GDP per capita of $100. Trend growth in these economies is 2%, 2.5% and 5% respectively. Calculate GDP per capita for each economy after 5, 10, 20, 50 and 100 years.
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Assuming a country’s economy maintains an 8% rate of growth, young adults starting at age 20 would see the average standard of living in their country more than double by the time they had reached age __________.
Question options:
a) 30
b) 60
c) 50
d) 40
Country Alpha and Country Beta initially have the same real GDP per capita. Country Alpha experiences no economic growth, while CountryBeta grows at a sustained rate of 5 percent. In 14 years, Country Alpha’s GDP will be approximately _________ that of Country Beta.
Question options:
a) triple
b) double
c) one-half
d) one-fourth
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1. Consider the following Romer model of economic growth:
Y₁ = A₁Lyt
AA, = ZA,L,
Lat = Lyt=
= L
Lat = lL
(a) If
4₁ = 100, ē = 0.1,ī = 1/3,000,
[= 1,000,
and
what is the growth rate of knowledge in this
economy?
(b) What is the growth rate of per capita output in this economy?
(c) Using the information from year 1, what is the level of per capita output in this economy in year 5?
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11) The relationship between the growth rate of an economic variable, gt, and its level, yt, can be approximated by
A) gt = yt - yt - 1.
B) gt = logt - log yt - 1.
C) yt = log gt - log gt - 1.
D) log gt = yt - yt - 1.
12) The business cycle component of the log of real per-capita GNP is equal to
A) log of actual real GNP - log of trend GNP.
B) log of trend GNP ÷ log of actual real GNP.
C) log of trend GNP - log of actual real GNP.
D) log of actual real GNP ÷ log of trend GNP.
13) For the study of economic growth, it is most helpful to examine movements in ________; for the study of business cycles, it is most helpful to examine movements in ________.
A) trend GNP; trend GNP
B) trend GNP; deviations from trend in GNP
C) deviations from trend in GNP; trend GNP
D) deviations from trend in GNP; deviations from trend in GNP
14) Over the twentieth century, growth in per-capita GNP was highest
A) immediately prior to the Great…
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1.1.
Basic properties of growth rates. Use the fact that the growth rate of a variable equals the time derivative of its log to show:
(a) The growth rate of the product of two variables equals the sum of their growth rates. That is, if Z(t) = X(t)Y(t), then Ż(t)/Z(t) =
[X(t)/X(t)] + [Ÿ(t)/Y(t)].
(b) The growth rate of the ratio of two variables equals the difference of their growth rates. That is, if Z(t) = X(t)/Y(t), then Ż(t)/Z(t) =
[X(t)/X(t)]-[Y(t)/Y(t)].
(c) If Z(t) = aX(t)a, then Ż(t)/Z(t) = aX(t)/X(t).
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Q)1
a) Canada's real GDP was 2,016 billion dollars in 2017 and 2,053 billion dollars in 2018. Canada's population growth rate in 2018 was 0.8 percent. Calculate Canada's economic growth rate and growth rate of real GDP per person in 2018.
b) Calculate the approximate number of years it will take for real GDP per person to double if an economy maintains an economic growth rate of 12 percent a year and a population growth rate of 7 percent a year.
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macro economy
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5)
Suppose that an economy starts off with a per capita real GDP of $5,000.
How large will the per capita GDP of this country be if it grows at an annual rate of 6% for 40 years?
Use compound growth rate formula. Show your calculations and the unit of account of your answer.
Answer:
6)
The graph below represents per-worker production functions for the same country. Answer the
following questions using this graph.
Real GDP
per hour
worked, Y/L
$17,000
16,400
16,000
15,000
Production
function3
B
Production
function2
E
Production
function1
a)
Answer:
$50,000
60,000
70,000
Capital per hour
worked, K/L
Which concept is illustrated by the movement from point A to B or from point B to C?
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Only answer the 2nd MCQ question of the growth rate of output per capita
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3. Use the following information to answer the questions below:
(1) the rate of depreciation is 10% per year,
(2) the population growth rate is 2% per year, and
(3) the growth rate of technology is 3% per year.
(a) The annual growth rate of "effective labor" in the steady state equals_
(b) The level of investment needed to maintain a constant capital stock ( K ) in this
economy is
xK.
(c) The level of investment needed to maintain constant capital per effective worker
(K/(AN)) is
_x K.
(d) The steady state growth rate of aggregate output in this economy is
%.
(e) The steady-state growth rate of output per worker in this economy is
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“Since 1980, aggregate per capita GDP in sub-Saharan Africa has declined at almost 1 percent per annum. The decline has been widespread: 32 countries are poorer now than in 1980. Today, sub-Saharan Africa is the lowest-income region in the world...It is clear that Africa has suffered a chronic failure of economic growth. The problem for analysis is to determine the causes” (Collier and Gunning 1999: ‘Why has Africa grown slowly?’).
Explain the possible reasons why sub-Saharan Africa grew so slowly from 1980- 1999?
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Question 9
Which of the following statements is true?
1. If output per head is proportional to the number of ideas had in the past, then a constant
rate of growth requires ever rising numbers of new ideas each year.
2. World population growth is a potential source of new ideas.
a) Both 1 and 2
b) 1 only
c) 2 only
d) Neither 1 nor 2
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Question 7
What is meant by economic growth and why is it one of the most important goals macroeconomists seek to achieve? In your explanation, show the relationship between production, consumption, and investment in periods of economic growth?
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7. Numbers in the Romer model (II): Now suppose the parameters of the model take the following
values: A = 100,7 = 0.06, z=1/3000, and L = 1000.
(a) What is the growth rate of output per person in this economy?
(b) What is the initial level of output per person? What is the level output per person after 100 years?
(c) Now consider the following changes one at a time: a doubling of the initial stock of knowledge Ao, a
doubling of the research share I, a doubling of research productivity Z, and a doubling of the population
L. How would your answer to parts (a) and (b) change in each case?
(d) If you could advocate one of the changes considered in part (c), which would you choose? Write a
paragraph arguing for your choice.
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Can you please help me with this question
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- Can you help me with this please, Thank you!arrow_forwardEconomic growth and Production Function Practice 1) The following values relate to the countries below for the following 3 years in terms of Real GDP: Years Canada 1.722 trillion 1.742 trillion Tajikistan 7.765 billion Netherlands. 913.6 billion 2018 2019 8.301 billion 907.1 billion 2020 1.643 trillion 8.194 billion 912.2 billion a) Calculate the Real gdp growth rate for each country and between the following 2 periods (2018-2019 and 2019-2020) b) State how long it will take for each country in 2020 in order to double their levels of real gdp. c) Which country is more likely to achieve economic growth faster? why do you think this is?arrow_forwardKorea. Over the last 60 years or so, Korea has been one of the most successful economies in the world. What are the sources of this success? Consider the following data: GDP per capita is expressed in 2017 US dollars. Population and employment are in millions of heads. Capital is in thousands of dollars. Education is a human capital index based on the average years of schooling. (a) Compute the (average continuously compounded) growth rate of GDP per worker. (b) Use our growth accounting methodology to allocate growth in output per worker to TFP, capital per worker, and human capital. What factors are most important? (c) What is the growth rate of GDP per capita? How does it differ from growth in output per worker? Why?arrow_forward
- 5. Suppose that the economy's production function is Y = √KVLA where K is capital, L is labor, and A is the state of technology. Suppose that the saving rate (s) is equal to 2.4%, the rate of depreciation of capital (6) is equal to 3%, the number of workers grow at 0.7% per year and the rate of technological progress is 3%. (a) Find the steady state values of: iv. v. growth rate of output growth rate of output per worker (b) Suppose that the growth rate of workers decreases. What is its short-run and the long-run effect on the growth rate of output per worker ?arrow_forward7. Suppose that the economy's production function is Y = √K√LA where K is capital, L is labor, and A is the state of technology. Suppose that the saving rate (s) is equal to 6%, the rate of depreciation of capital (8) is equal to 5%, the number of workers grow at 5% per year and the rate of technological progress is 4%. (a) Find the steady state values of: iv. growth rate of output per worker growth rate of output v. (b) Suppose that the saving rate increases. What is its short-run and the long-run effect on the growth rate of per-capita output?arrow_forwardThe economy has grown by 4% per year over the past 30 years. During the same period, the labor force has grown by 1% per year and the quantity of physical capital has grown by 5% per year. Each 1% increase in physical capital per worker is estimated to increase productivity by 0.4%. Assume that human capital has not changed during the past 30 years. What is the growth rate of productivity? A) 5% B) 4% C) 3% D) 1.6%arrow_forward
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