Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
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Question
Chapter 9.A, Problem 3PA
To determine
The change in productivity of labor, capital and total factor productivity.
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Suppose an economy described by the Solow model is in a steady state with population growth n of 1.8 percent per year and
technological progress g of 1.8 percent per year. Total output and total capital grow at 3.6 percent per year. Suppose further that the
capital share of output is 1/3. If you used the growth-accounting equation to divide output growth into three sources—capital, labor,
and total factor productivity—how much would you attribute to each source?
Suppose an economy described by the Solow model is in steady state with population growth n of 1.8 percent per year and technological progress g of 1.8 percent per year. total output and total capital grow at 3.6 percent per year. suppose further that the capital share of output is 1/3. if you used the growth accounting equation to divide output growth into three sources- capital, labor, and total factor productivity- how much would you attribute to each source? compare your results to the figures we found for the united states in tables 9-2.
Suppose that we modify the Solow growth model by allowing long-run technological progress. That is, suppose that z = 1 for convenience and that there is labor-augmenting technological progress, with a production function
Y =F(K,bN)
where b denotes the number of units of "human capital" per worker, and bN is "efficiency units" of labor. Letting b' denote future human capital per worker, assume that b' = (1 + f ) b, where f is the growth rate in human capital.
(c) In the real world, we usually consider education level as a proxy to human capital. To examine the theory, what suggestions can you make to growth economists? What are factors other than education can you think of that contribute to human capital?
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- Evaluate the following statement. People do not save enough or invest enough in their education. What would be the arguments for and against government policies that encourage an increase in private savings and more investment in education? Using appropriate equations and graphs, consider the implications of both the Solow growth model and the endogenous growth model, but also their limitations, when addressing these questions.arrow_forwardAssume that an economy is described by the Solow model in the long run. The rate of population growth in this economy is n technological growth is g rates of total GDP, GDP per worker, and GDP per effective worker? 0.01 and the rate of 0.02. What are the long-run (steady state) growth rates of total GDP, GDP per worker, and GDP per effective worker?arrow_forwardThe Solow model without exogenous productivity growth predicts that rich countries with more capital will grow faster than poor countries with less capital, assuming other economic conditions are equal. Is this statement true or false? Explain.arrow_forward
- Use the Solow model to comment on how a wealth tax will likely affect the growth rate of the capital stock. How will this policy affect the growth rate of output per worker? How will this policy affect the wage rate for workers?arrow_forwardUse the Solow model to trace through the effect of these two scenarios on short and long-term growth rates in an economy. (i) A rise in the savings rate. (ii) A natural disaster hits a country and destroys half the country’s capital stock.arrow_forwardIn the Solow model, population growth leads to steadystate growth in total output, but not in output per worker. Do you think this would still be true if the production function exhibited increasin g or decreasing returns to scale? Explain.arrow_forward
- Consider our Solow-style model of education and suppose that there is a decrease in the population growth rate. What are the short- and long-run effects on the growth rate of GDP p.c.? Group of answer choices 1 The growth rate of GDP p.c. will be higher in the short run and higher in the long run. 2 The growth rate of GDP p.c. will be higher in the short run only. 3 The growth rate of GDP p.c. will be negative in the short run and positive in the long run. 4 The growth rate of GDP p.c. will the same in the short run and higher in the long run.arrow_forwardThe validity and ability of the Solow Growth Model in explaining the long-term growth of a country has been tested empirically.(a) In the Solow Growth Model we are introduced to the concept of the Golden Rule; optimum level of saving and capital formation to support growth. Is this Golden Rule concept proven empirically?(b) From what we have learned from the Solow Growth Model, describe some policies that can improve a country's economic growth rate.arrow_forwardDraw a well labeled graph that illustrates the steady state of the solow model with population growth. Use the graph to find what happens to steady state capital per worker and income per worker in response to each of the following exogenous changes D. A one time permanent improvement in technology increases the amount of output that can be produced from any given amount of capital and labor. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward
- Consider the following Solow growth model in which households save a constant fraction of their income. Let N be the population (also the labor force) in the current period. Assume that the population follows N′ = (1+n)N where N′ is the population in the future period, and n is the net population growth rate. Assume that the output is produced according to the production function Y = zF(K, N), where z is the total factor productivity, K is capital stock, and F(K, N) exhibits constant returns to scale. Capital depreciates at the rate d where 0 < d < 1. The capital stock changes over time according to K′ = (1 − d)K + I where I is the investment level. (a) Derive the equation that determines the future capital-per-worker in competitive equilibrium. Here is some additional information for parts (5b), (5c), and (5d). Suppose that the economy is initially in steady state, and experiences a natural disaster (e.g. the recent quake and tsunami in Japan in 2011) that destroys some of the…arrow_forwardwhen a country adds capital what is it doing to its productivity and GDP? Which variable in the Solow Model equation is it changing?arrow_forwardIn the Solow–Swan model, a decrease in the rate of population growth will have what effect on the steady-state level of real GDP per capita? a. Increase b. No change in real GDP per capita because although it does change the rate at which output and population are growing, it will make both growth rates change by the same amount and so the output-population ratio will be unchanged c. Decrease d. No change in real GDP per capita because although it does change the level of labour, the level of capital will change to keep the capital-labour ratio the same as beforearrow_forward
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