2. Start from the income dynamics equation on slide 45: a 1-a = ( ² ) * (1₁1) ² - a Yt+1 = (a) Show graphically that the economy converges to a stable steady-state level of income per capita. (b) Show mathematically that the steady-state level of income per capita is given by y = p/y. (c) Explain why income per capita depends positively on the cost of raising children (p), and negatively on the preference for children (2). (d) Why is population density, not income per capita, a good measure of technological advancement in Malthusian economies?

2. Start from the income dynamics equation on slide 45: a 1-a = ( ² ) * (1₁1) ² - a Yt+1 = (a) Show graphically that the economy converges to a stable steady-state level of income per capita. (b) Show mathematically that the steady-state level of income per capita is given by y = p/y. (c) Explain why income per capita depends positively on the cost of raising children (p), and negatively on the preference for children (2). (d) Why is population density, not income per capita, a good measure of technological advancement in Malthusian economies?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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2: One consistent pattern of economic development for most rich countries is that the share of their labor force in agriculture and the share of their GDP from agriculture steadily declined as their total GDP per capita increased. Developing countries today should infer from this pattern that: [Select one] They should try to reduce the number of workers in agriculture in order to grow their economy. They should favor and focus primarily on promoting non-agricultural sectors since they are the most important sectors in developed countries. Both a and b. None of the above.
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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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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 ?