Country A and Country B both have the production function Y = F(K,L) = K¹/32/3 Assumethat neither country experiences population growth or technological progress and that 20 percent ofcapital depreciates each year. Assume further that country A saves 10 percent of output each year andcountry B saves 30 percent of output each year. Now suppose that both countries start in year 1 with acapital stock per worker of 1. In what year will consumption in country B be higher than consumption inCountry A?An excel spreadsheet may help simplify your calculation. You will need to round yourcalculations to 3 decimal places.O56t7

In this case, we have to discuss the terms consumption per worker and output per worker. Consumption…

Answered: Country A and Country B both have the…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter20: Economic Growth In The Global Economy

Section: Chapter Questions

Problem 4P

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Exercise 2: Growth and developmentCountries 1 and 2 have the production function: Yt = AiKαt L1−αt , where country 1 hasTotal Factor Productivity (TFP) of A1 = 25, country 2 has TFP A2 = 100, and α = 0.35for both. In the two countries population is constant and there is no technological progress.Every year capital depreciates by 6% in both countries. Country 1 saves 40% of output, andcountry 2 saves 20%.a) Write down the function of production per unit of labor. Suppose the two countriesstart with an initial capital stock (per unit of labor) of 500, what are the initial income andconsumption per unit of labor in both countries?b) Determine their steady state levels of capital, income and consumption per unit oflabor.c) Determine the difference in their steady state level of income per unit of labor, andhow much of that difference is due to differences in TFP and how much is due to differencesin capital per unit of labor.d) Suppose now that country 2 suddenly has access to the country 1…
A country aims to double real GDP per capita in the next 25 years. If the rate of population growth in the country is 0.9% per year then at approximately what rate does real GDP need to grow to achieve this goal? Enter a number rounded to one decimal place. W ASUS f11
Between 1970 and 2005, Chinaâ€™s GDP per capita grew at an average rate of 7.3% per year while GDP per capita in the US grew at an average rate of 2.2%. In 2005, US GDP per capita was $36,806 and Chinese GDP per capita was $5,955. Assuming that the two countries continue to grow at these rates, in what year will China overtake the US in terms of 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. During 1960-2010, which countries were able 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?
Many demographers predict that the UnitedStates will have zero population growth in thetwenty-first century, in contrast to average popu-lation growth of about 1 percent per year in thetwentieth century. Use the Solow model to fore-cast the effect of this slowdown in populationgrowth on the growth of total output and the growth of output per person. Consider theeffects both in the steady state and in the transi-tion between steady states.
Exercise 2: Growth and development Countries 1 and 2 have the production function: Y = AKL-a, where country 1 has Total Factor Productivity (TFP) of A₁ = 25, country 2 has TFP A₂ = 100, and a = 0.35 A2 for both. In the two countries population is constant and there is no technological progress. Every year capital depreciates by 6% in both countries. Country 1 saves 40% of output, and country 2 saves 20%. a) Write down the function of production per unit of labor. Suppose the two countries start with an initial capital stock (per unit of labor) of 500, what are the initial income and consumption per unit of labor in both countries? b) Determine their steady state levels of capital, income and consumption per unit of labor. c) Determine the difference in their steady state level of income per unit of labor, and how much of that difference is due to differences in TFP and how much is due to differences in capital per unit of labor. d) Suppose now that country 2 suddenly has access to the…
YIN 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…
./3-2/3 Given a production function Y₁ = ĀKĻ³³Ī²³, if Kô=8, Ā = 2,Ī = 4, 5 = 0.2, and d = 0.05: (a) Calculate the steady-state level of capital and output. (b) Calculate K₁, 1₁, Y₁ and C₁.
Suppose, a country X has a GDP level of 4, 50,000 and a growth rate of 10% in 2007(calculated at the end of the fiscal year 2007). The experts predict that the growth ofthe economy of Country X will gradually slowdown in the coming years. Moreprecisely, they foresee the following growth rates for the future:2007 – 2010 = 10%2010 – 2013 = 9%2013 – 2016 = 7.5%2016 – 2019 = 5%2019 – on = 1% Hint: The list above should be read as saying that, for instance, the growth rate fromthe end of the fiscal year 2007 until the end of 2010 will be 10 %, then from the end of2010 until the end of 2013 it will be 9% and so on. Assuming that the predictions of the experts listed above are accurate, when in thefuture will Country X’s GDP double compared to the GDP level of 2007? Consider now the more optimistic scenario in which the economy does not slow downand the current growth rate of 10% remains constant in the coming years. How longwill it take for the GDP level to double in this scenario? Express…
The Accelerated and Shared Growth Initiative for Botswana was launched by Deputy President in February 2006. After research and discussion with stakeholders, governmentidentified six “binding constraints on growth” that needed to be addressed so as to progress in its desire forshared growth and to achieve its target of halving unemployment and poverty between 2004 and 2014. Thiscould be achieved if the economy grew at an average rate of at least 4.5% in the period to 2009, and by anaverage of 6% in the period 2010 to 2014. These binding constraints were: deficiencies in government’s capacity the volatility of the currency low levels of investment infrastructure and infrastructure services shortages of suitably skilled graduates, technicians and artisans insufficiently competitive industrial and services sectors and weak sector strategies inequality and marginalisation, resulting in many economically marginalised people being unableto contribute to and/or share in the benefits of…
Consider a country with production function unction ? = 5? 1/2, where y is the output per worker and kis capital per worker. Suppose the investment in capital occurs at a rate of 35% of income perworker every period, the depreciation rate is 1.5% and the population growth rate is 2%. Use excel toplot the production function, investment line and capital depletion line with k on the x-axis (usethe attached spreadsheet to draw your graphs).a. What is the steady state level of y and k.b. Suppose TFP increases by 20%. What happens to the steady state y and k?c. Suppose the investment rate increases to 40%. What happens to the steady state y and k?

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