(a) Suppose that both Ghana and Nigeria have the following production function Y = f(K,L) = K©5L05 (1) What is the per-worker production function? (i) Assume that neither country experiences population growth or technological progress and that 5 percent of capital depreciates each year. Assume further that Ghana saves 10 percent of output each year and Nigeria saves 15 percent of output each year. Using your answer from (i) and the steady-state condition that investment equas depreciation, find the steady-state kvels of income (output) per worker and consumption per worker for each country. (b) Explain four (4) reasons why the rates of saving and investment vary so much from country to country. (c) With the aid of a diagram, explain the effect on exchange rate, income, output and employment in Ghana if there is a fiscal expansion under conditions of a steeply sloped BP curve and a flatter LM curve.

(a) Suppose that both Ghana and Nigeria have the following production function Y = f(K,L) = K©5L05 (1) What is the per-worker production function? (i) Assume that neither country experiences population growth or technological progress and that 5 percent of capital depreciates each year. Assume further that Ghana saves 10 percent of output each year and Nigeria saves 15 percent of output each year. Using your answer from (i) and the steady-state condition that investment equas depreciation, find the steady-state kvels of income (output) per worker and consumption per worker for each country. (b) Explain four (4) reasons why the rates of saving and investment vary so much from country to country. (c) With the aid of a diagram, explain the effect on exchange rate, income, output and employment in Ghana if there is a fiscal expansion under conditions of a steeply sloped BP curve and a flatter LM curve.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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