3. (a) We saw in Chapter 4 that the TFP for Brazil is about 0.43 (=43%). Briefly and clearly explain what this number 0.43 tells us. O TFP refers to Total Factor Productivity of a nation, and it measures how effective is an economy by applying all factors of production. At the given question, the 0.43 TFP for Brazil refers to the quantity produced using 100% of inputs. (b) Relative to the USA, Argentina's y = 0.30 and k = 0.18. Calculate its TFP (Ā) using the production model we studied (round to the 2nd decimal place). y=Ak1/3 0.30= A*(0.18)¹3 A= 3.33333 A=3.33
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- In 1980, Denmark had a GDP of 70 billion (measured in U.S. dollars} and a population of 5.1 million. In 2000, Denmark had 3 GDP of 160 billion (measured in U.S. dollars} and a population of 5.3 million. By what percentage did Denmarks GDP per capita rise between 1980 and 2000?An economy starts off with a GDP per capita of 5,000. How large will the GDP per capita be if it grows at an annual rate of 2 for 20 years? 2 for 40 years? 4 for 40 years? 6 for 40 years?Why dues productivity growth in high-income economies not slow down as it runs into diminishing returns from additional investments in physical capital and human capital? Does this show one area where the theory of diminishing returns fails to apply? Why or why not?
- Say that the average worker in the U.S. economy is eight times as productive as an average worker in Mexico. If the productivity of U.S. workers grows at 2 for 25 years and the productivity of Mexicos workers grows at 6 for 25 years, which country will have higher worker productivity at that point?Table 3-2 Hours Needed to Make 1 Unit of Number of Units Produced in 20 Hours Pastrami Milk Pastrami Milk England 1 4 20 5 France 5 2 4 10 Refer to Table 3-2. Assume that England and France each has 20 labor hours available. If each country divides its time equally between the production of cheese and wine, then total production is a. 12 units of pastrami and 7.5 units of milk. b. 20 units of pastrami and 12 units of milk. c. 12 units of pastrami and 20 units of milk. d. 20 units of pastrami and 7.5 units of milk.120 100F NOR ARE SGP CHE HKG SWE TWN Na. A VEN 40 60 80 100 120 Relatiwe GDP per enpita to the US lewel - 1970 In the figure above, GDP per capita relative to the US level for a large group of countries is plotted for years 1970 (in the horizontal axis) and 2000 (in the vertical axis). Which one of the following statements is correct? O Income per capita of countries on the 45 degree line has grown at a similar rate than income per capita of the US in each year. O Income per capita of each country is plotted according to how strongly it correlates to the income per capita of the US in each year. O The income per capita of those countries below the 45 degree line has grown the fastest in between years 1970 and 20 O The income per capita of those countries on the 45 degree line has not grown in between years 1970 and 2000.
- Show that, when using a traditional economic production function,doubling our population can double our output if capital stocks alsodouble. Use the production function: Q = AK L , where A representstechnology in an economy, K capital, and L labor. Double K and L andshow that Q also doubles, assuming α=β=1/2. Now show that, when we incorporate natural capital into thediscussion, doubling the population does not increase output in thesame way (since natural capital cannot also grow). Use theproduction function: Q = AK L N , where N is natural capital. DoubleK and L and show that Q less than doubles, assuming α=β=γ=1/3.The following table shows the GDP per capita of various countries forthe years 1960 and 2010 in PPP-adjusted 2005 dollars. The table alsocontains the implied growth rates, which show how much on average eachcountry needed to grow each year to reach the 2010 level of GDP per capitastarting from the 1960 level of GDP per capita. Use the table to answer thefollowing questions. 1. During 1960-2010, which countries failed to reduce the gap betweentheir GDP per capita and the U.S. GDP per capita?The following table shows the GDP per capita of various countries forthe years 1960 and 2010 in PPP-adjusted 2005 dollars. The table alsocontains the implied growth rates, which show how much on average eachcountry needed to grow each year to reach the 2010 level of GDP per capitastarting from the 1960 level of GDP per capita. Use the table to answer thefollowing questions. 1. Why have some countries reduced the gap between their incomes andthat of the United States and other countries failed to do so?
- A country faces diminishing marginal returns when increasing it's capital stock. If this country added 100 units of capital last year and saw their GDP rise by $1,000 per person, what would you expect to happen if they had added 200 units of capital instead? O It is impossible to tell what would happen GDP would increase by less than another $1,000 per person GDP would increase by another $1,000 per person GDP would increase by more than another $1,000 per personYIN CN Next question Suppose that the production function is given by Y- 05VR N 454 where Y is output, Kis capital, and N is the number of workers 4 Suppose that 60 05 With your favonte spreadsheet software, compute steady-state output per worker and steady-state consumption per worker for s 0, 801, a02, s1 Graph the steady-state level of output per worker and the steady-state level of consumption per worker as a function of the saving rate 25 1) Using the multipoint curve drawing tool, drawa curve showing the relationship between YIN and the saving rate. Properly label your curve 15 2) Using the multipoint curve drawing tool, draw a curve showing the relationship between CIN and the saving rate. Properly label your curve 0.5 Although the control ponts for your multpownt curves do not have to be exact try to plot them as accurately as possible 01 02 03 a'4 os o6 07 os 09 Saving rate, At what saving rates are YIN and CIN maximized? After plotting the final point of your multipoint curve…A country faces diminishing marginal returns when increasing it's capital stock. If this country added 1,000 units of capital last year and saw their GDP rise by $500 per person, what would you expect to happen if they had added 2,000 units of capital instead? O GDP would increase by another $500 per person O GDP would increase by less than another $500 per person O GDP would increase by more than another $500 per person O It is impossible to tell what would happen What is a potential downside of using patents to promote the creation of new technology? Without a market test, patents might be given to technology which ends up being useless. O Government money may be directed towards unproductive goals. It slows the spread and development of those ideas by restricting competition. They prohibit competition forever. What is the law of diminishing marginal returns?