Macroeconomics (MindTap Course List)
10th Edition
ISBN: 9781285859477
Author: William Boyes, Michael Melvin
Publisher: Cengage Learning
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Chapter 16, Problem 4E
To determine
Suppose labor's share of
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Suppose you are given data on the rate of growth of GDP, capital, and labour, and the share of these two factors in GDP. How would you calculate the contribution of Total Factor Productivity to growth? Explain it verbally and formally.
Suppose y = k1/2, total factor productivity is constant and equal to 1, s = 0.40, and d = 0.10. When the economy reaches the steady state, real GDP per worker is ________.
A. $2
B. $4
C. $8
D. $16
Why does an increase in the labor force cause the Market Productivity of Capital to increase?
Chapter 16 Solutions
Macroeconomics (MindTap Course List)
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- 50. Between 2008 and 2016, Russia's real GDP increased by6.7%, its labor force grew by0.5%, and its total capital stock grew by17.5%. Assuming that labor's share of production (and total income) was60%, by how much did total factor productivity change?arrow_forwardExplain how each of the following contributed to fast or slow growth in labor productivity and to which era the factor most clearly applies (pre-1970, 1970s to 1995, 1995 to 2004, after 2004). 1. Increase in female labor-force participation 2. Completion of the interstate highway system 3. Retirement of the baby boom generation 4. Invention of the Internet and World Wide Webarrow_forwardText:Using the labor market, the production function Real GDP = T (L, K), and the LRAS curve, describe briefly the process by which a decrease in income taxes impacts economic growth.arrow_forward
- In the production function, Total factor productivity = A = 3.5% Labor input = L = 0.75 Capital input = K = 1 – 0.75 = 0.25 Therefore, Y = 3.5% - {(0.25 × 2%) + (0.75 × 2%)} = 3.5% - (0.005 + 0.015) = 0.035 – 0.02 = 0.015 = 1.5% Answer: Contribution to growth by total factor productivity is 1.5%. Does this mean that labour contributes 75 per cent of the increased output? Explain.arrow_forwardQ) The economist of country A is considering the following list of policies. For each of the following policies, determine which factor of growth that the policy is related to((1) natural resources; (2) physical capital; (3) human capital; (4) technology; or(5) institutions): a) Government allows more workers to immigrate b) Government relaxes the regulations for firms to borrow c) Government lends money to farmers to buy machines. d) Government plants more trees to protect the environment. e)Government encourages citizens to vote Solve this earlyarrow_forwardReply to parts a-d a) The relationship between the amount of inputs used in production and the amount of output produced is called an output function. False True b) Which factor would be captured in total factor productivity? an increase in infrastructure spending greater educational attainment increased extraction of natural resources the impact of a hurricane c) Countries with high inflation rates cannot have high rates of economic growth. False True d) Financial stability helps to improve standards of living and generate economic growth. True Falsearrow_forward
- Suppose the GDP growth resulting from physical capital in an economy is 1%, and the growth resulting from human capital is 2%. If the annual growth rate of GDP is 5%, the growth resulting from technology equals: 1% 2% 3% 4%arrow_forwardAssume that the growth rate of the capital stock in each period is determined by the level of output in the previous period. 1) An economy of 80 million people has ten percent of them engaged in research and development, where their productivity is 0.0035. The economy is on a balanced growth path, when suddenly 2.88 million people move from goods production into R&D, raising the fraction there to 13.6 percent. In the one period that begins with this labor reallocation, the growth rate of output is ________. [Refer to the instruction above.] A) 2.8% B) 0.0% C) 3.8% D) 2.2%arrow_forwardCalculate the growth rate of total factor productivity in each decade.arrow_forward
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