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Fall 2014 Week 8 Tutorial Questions (Ch6)
Chapter 6:
Q1: Macroeconomics P.220 Review Questions #1
Q2: Macroeconomics P. 220 Review Questions #2
Q3: Macroeconomics P.220 Review Questions #4
Q4: Macroeconomics P.220 Numerical Problems #1
Q5: Macroeconomics P.220 Numerical Problems #2
Q6: Macroeconomics P.220 Numerical Problems #5
Q7: Macroeconomics P.221 Analytical Problems #1
Q1:
According to the growth accounting approach, what are the three sources of
economic growth? From what basic economic relationship is the growth
accounting approach derived?
Q2:
Of the three sources of growth identified by growth accounting, which one is
primarily responsible for the slowdown in Canadian economic growth after 1973?
What explanations have been given for the decline in this source of growth?
Q3:
True or false? The higher the steady-state capital-labour ratio is, the more
consumption each worker can enjoy in the long run. Explain your answer.
Q4:
Two economies, Hare and Tortoise, each start with a real GDP per person of
$5000 in 1950. Real GDP per person grows 3% a year in Hare and 1% a year in
Tortoise. In the year 2000, what will be real GDP per person in each economy?
Make a guess first; then use a calculator to get the answer.
Q5:
Over the past 20 years, an economy’s total output has grown from 1000 to 1300,
its capital stock has risen from 2500 to 3250, and its labour force has increased
from 500 to 575. All measurements are in real terms. Calculate the contributions
to economic growth of growth in capital, labour, and productivity
a. assuming that αK = 0.3 and αN = 0.7;
b. assuming that αK = 0.5 and αN = 0.5.
Q6:
An economy has the per-worker production function
yt = 3kt0.5,
where yt is output per worker and kt is the capital-labour ratio. The depreciation
rate is 0.1, and the population growth rate is 0.05. Saving is
Week 8
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Fall 2014 Week 8 Tutorial Questions (Ch6)
St = 0.3Yt ,
where St is total national saving, and Yt is total output.
a.
What are the steady-state values of the capital-labour ratio, output per
worker, and consumption per worker?
The rest of the problem shows the effects of changes in the three fundamental
determinants of long-run living standards.
b.
Repeat part (a) for a saving rate of 0.4 instead of 0.3.
c.
Repeat part (a) for a population growth rate of 0.08 (with a saving rate of
0.3).
d.
Repeat part (a) for a production function of
yt = 4kt0.5.
Assume that the saving rate and population growth rate are at their original
values.
Q7:
Week 8
According to the neoclassical growth model, how would each of the following
affect consumption per worker in the long run (that is, in the steady state)?
Explain.
a.
The destruction of a portion of the country’s capital stock in a war
b.
A permanent increase in the rate of immigration (which raises the overall
population growth rate).
c.
A permanent increase in energy prices.
d.
A temporary rise in the saving rate.
e.
A permanent increase in the fraction of the population in the labour force
(the population growth rate is unchanged).
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