Only question 1 and 2 than in cases of resources not being used at all. Nonetheless, misallocation canhave a large effect on efficiency.With respect to economic growth, a significant form of this inefficiency ismisallocation among sectors-that is, directing resources to the wrong sectors(distinct parts) of the economy. These sectors may simply be the different regionsAlternatively, in most poor countries, we can distinguish between anof a country..urban sector, with advanced modes of production and organization, resembling amore industrialized economy, and a rural sector in which production technologiesremain primitive.Why would misallocation of factors among sectors ever take place? To see howmisallocation can happen, we must step back and ask a more basic question: Whywould we expect resources to be optimally allocated in the first place?We consider this problem in a simple setting. Suppose there are two sectorsin the economy, called Sector 1 and Sector 2. In each sector, there is a productionfunction by which capital and labor are transformed into output. Total output ofthe economy is the sum of the output in the two sectors. We can now ask a simplequestion: If the quantities of capital in each sector are fixed, what is the optimalallocation of labor between the two sectors that will maximize the total output ofthe economy? The answer, which you may remember from previous economicscourses, is that the value of output will be maximized when the marginal productof labor in the two sectors is the same.Figure 10.3 illustrates the optimal allocation of labor. The quantities of labor ineach of the two sectors are measured along the horizontal axis. One curve showsFIGURE 10.3Efficient Allocation of Labor between SectorsUnits of output10.3 Types of InefficiencyMarginal productof labor in Sector 1Labor allocatedto Sector 1Marginal productof labor in Sector 2Labor allocatedto Sector 2 3Draw a well labeled graph (similar to graph 10.3 on page 283 from textbook) showing the point of initialequilibrium for each of the 3 scenarios below:1.ii.111.iv.Starting with an initial equilibrium/allocation of workers, show the impact of differentialtechnological progress (specifically, sector 1 experiencing a higher technological progresscompared to sector 2) on the allocation of workers across the sectors. Explain your answer in2-3 sentences.Starting with an initial equilibrium/allocation of workers, show the impact of creation ofUnions in sector 2 with sector 1 remaining as nonunionized on the allocation of workersacross the sectors. Explain your answer in 2-3 sentences.Starting with an initial equilibrium/allocation of workers, show the impact of rise in overallpopulation on the allocation of workers across the sectors. Explain your answer in 2-3sentences.Do all the scenarios above result in inefficiency or dead weight loss to the society? Explainyour answer in 2-3 sentences. No graph is required for this part of the answer.

The extra output that is created when one more unit of labour is employed while keeping all other…

Draw a well labeled graph (similar to graph 10.3 on page 283 from textbook) showing the point of initial equilibrium for each of the 3 scenarios below: i. 11. Starting with an initial equilibrium/allocation of workers, show the impact of differential technological progress (specifically, sector 1 experiencing a higher technological progress compared to sector 2) on the allocation of workers across the sectors. Explain your answer in 2-3 sentences. Starting with an initial equilibrium/allocation of workers, show the impact of creation of Unions in sector 2 with sector 1 remaining as nonunionized on the allocation of workers across the sectors. Explain your answer in 2-3 sentences. uilibrium/allocation of workers, show the impact of rise in overall or in 2-3

Draw a well labeled graph (similar to graph 10.3 on page 283 from textbook) showing the point of initial equilibrium for each of the 3 scenarios below: i. 11. Starting with an initial equilibrium/allocation of workers, show the impact of differential technological progress (specifically, sector 1 experiencing a higher technological progress compared to sector 2) on the allocation of workers across the sectors. Explain your answer in 2-3 sentences. Starting with an initial equilibrium/allocation of workers, show the impact of creation of Unions in sector 2 with sector 1 remaining as nonunionized on the allocation of workers across the sectors. Explain your answer in 2-3 sentences. uilibrium/allocation of workers, show the impact of rise in overall or in 2-3

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 5P

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Similar questions

What do the growth accounting studies conclude are the determinants of growth? Which is more important, the determinants or how they am combined?
Consider the Solow Model with no population or technological growth. Suppose that two countriesare identical except that in Country A the depreciation rate is greater than the depreciation rate inCountry B.a. How do you compare the steady state level of capital per worker in these countries? Illustrategraphically. Explain the economic intuition for the di erences in capital per worker in steadystate.b. Which country a higher output per worker in steady state? What about investment per workerin steady state? Explain carefully.
In the Solow growth model:1. Write the expression for consumption per capita in the steady-state equilibrium, asa function of capital per capita.2. What is the golden rule quantity of capital per capita ? Specifically, tell me thedefinition of this concept, and then relate it to the equation for the equilibriumconsumption per capita whose expression answers question (1) above.23. How do we find the golden rule savings rate, once we know the golden rule quantityof capital per capita?
2. Solow-Swan Model (a) You will demonstrate the importance of diminishing returns to capital in the Solow-Swanmodel. Draw a Solow-Swan diagram in which there are constant returns to capital. Thiswould happen if the production function were Yt= AKt, where A = 1. Furthermore,assume that the sum of population growth and the depreciation rate is greater than thesaving rate. Does the economy converge to a steady state in this case? To answer thisquestion, you should draw a Solow-Swan diagram in terms of output per person, as we didin class. Use this diagram to explain why the economy converges to a steady state or doesnot. (b) Assume, instead, that the sum of population growth and the depreciation rate is equal tothe saving rate. In this case, are there any steady states? If yes, describe the steady-statelevels of capital per person. If no, explain why not. (Note: Diagram is not needed for thispart.)
Would you expect capital deepening to result in diminished1etmns? Why or why not? Would you expect improvements in technology to result in diminished returns? Why or why not?
Consider a two-sector model of growth, with two kinds of investment opportunities one with a diminishing marginal product and one with a constant marginal product. A. Characterize the set of equilibria for this model. Does output in any of the equilibria have nonzero per capita- growth? B. What can this model help us explain that strict endogenous and neo-classical growth models cannot?
(a). Provide a definition of ‘technological capability’ and ‘social capability’ and describe the differences between them. Why can we say that innovation has a ‘systemic’ nature? (b). Financial development, social capital, favourable business regulation, trade openness are different aspects of ‘social capability’ influencing innovation processes and, therefore, economic development. Make a ranking of these factors according to their observed degree of importance for economic development. Explain why ‘inclusiveness’ and ‘equality in opportunities’ can strengthen the innovation capability of an economy. (c). Figure 1 below shows the cross-country correlation between the development of the education system and the level of economic development. Analyse Figure 1 by arguing about the importance of the education system for economic development in low, emerging, and developed countries. Please answer all the parts of this question.
One of your clients, a mining company with operations in the Democratic Republic of Congo and Zambia, is concerned withthe current macroeconomic environment’s impact on their operations. Among their worries is the slowdown in global growth, which is expected to moderate from 5.9 in 2021 to 4.4 percent in 2022—half a percentage point lower for 2022 than in the October World Economic Outlook.You are required to critically discuss some of the major factors that drove the global growth trajectoryi) Pre-Covid-19 pandemic ii) at the height of the pandemic iii) going into 2022 and beyond.
The International Monetary Fund (IMF) expects the Sultanate's GDP to grow 3 per cent next year compared to -2.8 per cent in 2020, as the COVID- 19 pandemic adversely impacts economies globally, a report said. According to the IMF's World Economic Outlook, oil exporting nations in the Middle East and Central Asia are expected to see a 3.9 per cent decline in GDP growth this year, rising however to 4.6 per cent in 2021, while growth in oil-importing countries is expected to decline to -0.8 per cent this year, rising to 2.9 per cent next year. "The COVID-19 pandemic is inflicting high and rising human costs worldwide," the multilateral global lender said in the Executive Summary of its report. "Protecting lives and allowing health care systems to cope have required isolation, lockdowns, and widespread closures to slow the spread of the virus. The health crisis is therefore having a severe impact on economic activity." According to the Fund, many countries face a multi-layered crisis…
Say that the average worker in Canada has a productivity level of $30 per hour while the average worker in the United Kingdom has a productivity level of $25 per hour (both measured in U.S. dollars). Over the next five years, say that worker productivity in Canada grows at 1% per year while worker productivity intheUKgrows3%peryear.Afterfiveyears,whowill have the higher productivity level, and by how much?
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.
. Suppose that society decided to reduce consumptionand increase investment.a. How would this change affect economic growth?b. What groups in society would benefit from thischange? What groups might be hurt?