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- Country A and country B both have the production function Y = F(K, L) = K^0,5L^0,5 A. Does this production function have constant returns to scale? Explain. B. What is the per-worker production function, y = f(k)? C. Assume that neither country experiences population growth or technological progress and that 5 percent of capital depreciates each year. Assume further that country A saves 10 percent of output each year and country B saves 20 percent of output each year. Using your answer from part (b) and the steady-state condition that investment equals depreciation, find the steady-state level of capital per worker for each country. Theen find the steady-state levels of income per worker and consumption per worker. D. Suppose that both countries start off with a capital stock per worker of 2. What are the levels of income per worker and consumption per worker? Remembering that the change in the capital stock is investment less depreciation, use a calculator or a computer spreadsheet…Explain what the Industrial Revolution was and where it began.How is the concept of technology, as defined with the aggregate production function, different from our everyday use of the word?
- Would the following events usually lead to capital deepening? Why or why not? A weak economy in which businesses become reluctant to make long-term investments in physical capital. A rise in international trade. A trend in which many more adults participate in continuing education courses through their employers and at colleges and universities.In class we argued that if people could accumulate human as well as physical capital, the production function would look like the “AK” production function. • (a) If the production function is AK and the savings rate is constant at rate “s”, and the rates of depreciation and populati on growth are δ and n respectively, what would the growth rate of the economy be? • (b) What would be the macroeconomic consequences of decreasing the savings rate in this economy? • (c) What would be the consequences of an increase in fertility in this economy? • (d) Would the consequences of decreasing fertility be UNAMBIGUOUSLY GOOD? • (e) Can human capital grow without bounds? Explain why or why not (make sure you discuss the physical nature of human capital). • (f) What is the growth rate of the economy (in the absence of technological progress) if human capital cannot grow without bounds?Graphically explain the golden rule level of capital.
- Ecuador's economy has a production function that is as follows: Y = K2/5L3/5 The men in Ecuador generally stay home performing household chores while women work. Since the Ecuadorian state television stopped airing soap operas, many men decided to join the workforce and thus the labor force increased by 6.5%. However, recent storms have destroyed much of the capital stock of the country and thus the capital stock shrank by 2.5%. A. Assuming there is no change in total factor productivity in Ecuador, how would the output of Ecuador's economy change? B. How would labor productivity (output per worker) be affected by the increase in labor and decrease in capital stock? Explain. C. Assuming instead that Ecuador's economy grew by 4.9%, what would be the change in total factor productivity in the economy?Given below is the the real GDP and potential GDP for the fictitious country "Alpha." a. Use the date to determine the the year-to-year growth rates of real GDP, the output gap as a percentage of potential GDP and state whether the gap is a recessionary gap or an expansionary gap. Instructions: Enter your responses as a percentage rounded to two decimal places. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Year Real GDP Potential GDP Real GDP growth Output gap Type of gap 2005 $17,500 $17,300 % (Click to select) expansionary recessionary 2006 $18,200 $17,800 % % (Click to select) expansionary recessionary 2007 $18,500 $18,300 % % (Click to select) recessionary expansionary 2008 $18,400 $18,800 % % (Click to select) expansionary recessionary 2009 $18,200 $19,300 % % (Click to select) recessionary expansionary 2010 $18,600 $19,700 % % (Click to select) recessionary…1. Country A and B both have the production functionY = F (K, L) = K ½L ½or Y = K0.5 L0.5 a) What is the per-worker production function, y= f (k)? Please make sure to write specificfunctional form of the per-worker production function. b) Assume that neither country experiences population growth nor technological progressand that 4 percent of capital depreciates each year. Assume further that country A saves 24percent of output each year and country B saves 16 percent of output each year. Using youranswer from part a) and the steady-state condition, find the steady-state level of capital perworker for each country. Then find the steady-state levels of income per worker for eachcountry and steady-state level of consumption per worker for each country.
- Consider the economies of Hermes and Gobbledigook, both of which produce gobs of goo using only tools and workers. Suppose that, during the course of 20 years, the level of physical capital per worker rises by 4 tools per worker in each economy, but the size of each labour force remains the same. first dropdown question options are (larger or smaller), second dropdown question options are (the brain drain, inward orietned growth, diminishing returns, constant returns, increasing returns), the third dropdown question oprions are (more diffucult or easier)Define and explain -Physical Capital, -Real Interest Rate, -Potential GDP,-Structural Unemployment, &-Diminishing Marginal Product of Labor.Using the law of motion for physical capital accumulation (K), what is the amount of capital for the next period if the amount of physical capital today is 20 and Investment is 15 (Assume a depreciation rate of 10%) a) 23 b) 33 c) 34 d) 35 3- Using the law of motion for physical capital accumulation (K), what is the steady state level of capital when investment is 10? (Assume a depreciation rate of 10% and remember that physical capital is constant at the steady state) a) 100 b) 50 c) 120 d) 123 4- What is the key difference between catching up growth and cutting edge growth? a) Cutting edge growth is based on capital accumulation while catching up growth is based on technological advances b) Cutting edge growth is based exclusively on natural resources unique to every country c) Cutting edge growth is based on innovation, new ideas. Catching up growth is based on physical capital accumulation d) None of the above