EBK MACROECONOMICS
10th Edition
ISBN: 9780134896571
Author: CROUSHORE
Publisher: VST
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Chapter 6, Problem 6AP
To determine
To evaluate: Output per woker remains unaffected with an equal increase in perecntage of capital and labor.
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Students have asked these similar questions
Assume the production function takes the general form:
Y=Z*F (K,L,A)where all marginal products are positive.Which 3 of the following statements are correct?a. If A is fixed, then population growth acts as a drag on growth of output per person.b. If A is fixed, then population growth acts as a drag on growth, and so Malthus was correct that populationgrowth will always reverse the impact of technological improvements.c. Both rises in z and rises in K/L (capital intensity) will boost output per worker.d. Growth in output per worker can occur due to rises in z (technology) or rises in K/L (capital intensity), orboth.
Assume that a country's production function is Y = K/2*L/2 and there is no population growth
or technological change.
a. What is the per-worker production function y = f (k)?
b. Assume that the country possesses 40,000 units of capital and 10,000 units of labor. What is
Y? What is labor productivity computed from the per-worker production function? Is this
value the same as labor productivity computed from the original production function?
c. Assume that 10 percent of capital depreciates each year. What gross saving rate is
necessary to make the given capital-labor ratio the steady-state capital-labor ratio? (Hint:
In a steady state with no population growth or technological change, the saving rate
multiplied by per-worker output must equal the depreciation rate multiplied by the capital-
labor ratio.)
Consider an economy with a Cobb-Douglas production function with α = 1/3 that
begins in steady state with a growth rate of technological progress of g of 2 percent.
Consider what happens when g increases to 3 percent.
(a) What is the growth rate of output per worker before the change? What happens
to this growth rate in the long run?
(b) Perform a growth accounting exercise for the economy, decomposing the growth
rate in output per capita into components contributed by capital per capita growth
and technology growth. What is the contribution of the change in g to output
per capita growth according to this formula?
(c) In what sense is the growth accounting result in part b producing a misleading
picture of this experiment? Explain why this is the case.
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