"Consider the simple production model studied in class, but with different exponents. Suppose that t production function is Cobb-Douglas. The exponent on capital is 0.1 and the exponent on labor is 0.9. T data for this economy is A=10, KO=300 and the initial population is LO-30. We will assume that everyone this country works so that population equals employment and per-person GDP equals per-worker GD Now suppose that the country receives foreign aid that is used to invest in infrastructure and elect vehicles. As a result, over the next few years, the economyos capital stock doubles to K1=600. Fortunatell no one is killed during the hurricane. In the Capital market the Demand will and the Supply will M As a result, the rental rate will Shift to the Right; Remain unaffected; Increase Shift to the Left; Remain unaffected; Fall Shift to the Left; Shift to the Right; Fall

"Consider the simple production model studied in class, but with different exponents. Suppose that t production function is Cobb-Douglas. The exponent on capital is 0.1 and the exponent on labor is 0.9. T data for this economy is A=10, KO=300 and the initial population is LO-30. We will assume that everyone this country works so that population equals employment and per-person GDP equals per-worker GD Now suppose that the country receives foreign aid that is used to invest in infrastructure and elect vehicles. As a result, over the next few years, the economyos capital stock doubles to K1=600. Fortunatell no one is killed during the hurricane. In the Capital market the Demand will and the Supply will M As a result, the rental rate will Shift to the Right; Remain unaffected; Increase Shift to the Left; Remain unaffected; Fall Shift to the Left; Shift to the Right; Fall

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 4P

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Similar questions

"Consider the simple production model studied in class, but with different exponents. Suppose that the production function is Cobb-Douglas. The exponent on capital is 0.1 and the exponent on labor is 0.9. The data for this economy is A=10, K0-300 and the initial population is LO-30. We will assume that everyone in this country works so that population equals employment and per-person GDP equals per-worker GDP. Now suppose that the country receives foreign aid that is used to invest in infrastructure and electric vehicles. As a result, over the next few years, the economyos capital stock doubles to K1=600. Fortunately, no one is killed during the hurricane. In the initial final equilibrium, per-worker GDP will be..." Between 12.3% and 14.4% higher than in the initial equilibrium. Between 7.0% and 8.0% higher than in the initial equilibrium. Between 4.4% and 6.6% lower than in the initial equilibrium. None of the above.
Question I - Solow Model without Population or Technology Growth Consider the Solow growth model with no population growth and no technology growth, i.e., n = x = 0. Output is created by a Cobb-Douglas production function combining Labor, Lt, and capital, Kt, such that output Yt is given by Y₁ = A+ KL 1-α = = Recall that, without population growth, Lt Lo and assume that Lo 1. Furthermore, recall that, without technology growth, At Ao and assume that A0 = 1. The law of motion for capital per worker is = kt+1 = (1 − 6) kt + sAtko. (1) Assume that the savings rate is s = 0.2, the depreciation rate is 8 = 0.1, and that the capital share is a = 0.3. 1. Use equation (1) to solve for the steady state level of capital, kss, (hint, replace kss in that equation on both sides) kss = What is the steady state level of capital? (Replace the numbers in the expression) = 2. Suppose that this economy starts with ko 1. Does capital grow or fall over time? What is the maximum level of capital per capita…
Show that, when using a traditional economic production function,doubling our population can double our output if capital stocks alsodouble. Use the production function: Q = AK L , where A representstechnology in an economy, K capital, and L labor. Double K and L andshow that Q also doubles, assuming α=β=1/2. Now show that, when we incorporate natural capital into thediscussion, doubling the population does not increase output in thesame way (since natural capital cannot also grow). Use theproduction function: Q = AK L N , where N is natural capital. DoubleK and L and show that Q less than doubles, assuming α=β=γ=1/3.
PER CAPITA OUTPUT to YEAR In the Romer model in figure above, at time to, a change in the shape of the production function can be explained by an increase in the: Select one: O a. ideas efficiency parameter. O b. population. O c. saving rate. O d. share of labor engaged in research. O e. growth rate.
In past decades, the Philippines has had a lower saving rate and a higher population growth rate than its regional peers. If this trend continued, its peers in the long run. the Solow growth model would have predicted that the country's per-capita income would be relatively O a. The answer to this question cannot be determined. O b. higher than O C. the same as O d. lower than
A country faces diminishing marginal returns when increasing it's capital stock. If this country added 1,000 units of capital last year and saw their GDP rise by $500 per person, what would you expect to happen if they had added 2,000 units of capital instead? O GDP would increase by another $500 per person O GDP would increase by less than another $500 per person O GDP would increase by more than another $500 per person O It is impossible to tell what would happen What is a potential downside of using patents to promote the creation of new technology? Without a market test, patents might be given to technology which ends up being useless. O Government money may be directed towards unproductive goals. It slows the spread and development of those ideas by restricting competition. They prohibit competition forever. What is the law of diminishing marginal returns?
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.
In the Solow growth model, if y=A/K, s=0.1, n=0.05, A=10, d=0.05, then the steady state output per worker is O A. 10 O B. 50 OC. 100 O D.90 O E. 150
When economists speak of "long-run economic growth, they mean increasing the Select one: O a. real GDP of a country. O O O b. geographic size of a country. c. per capita real GDP of a country. d. population of a country. According to the instructors calculations, the average person in the United States spends Select one: O O O O a. approximately 5 and ½ hours b. about 3 and ½ hours c about 8 hours d. 45 minutes On a graph with savings on the x-axis and real interest rates on the y-axis, the supply of savings curve following the law of supply would: Select one: O O O O a. be horizontal a day in activities needed to continue living (what he described as not dying b. have a negative slope c. be vertical d. have a positive slope
In the Solow model with population growth and technological progress, an economy's output per worker grows at 3 percent and the total output grows at 5 percent. Therefore, we can conclude that the technology is growing by and the population is growing by O a. 2 percent; 2 percent O b. 3 percent; 2 percent O C. 2 percent; 3 percent O d. 3 percent; 3 percent
In the Solow model with technological progress, suppose that the rate of depreciation is 10% per year, the population growth rate is 2% per year, and the growth rate of technology is 3% per year. Which of the following equals the annual growth rate of "effective labor" in the steady state in this economy? O 2% O 3% O 5% 10%
A country faces diminishing marginal returns when increasing it's capital stock. If this country added 100 units of capital last year and saw their GDP rise by $1,000 per person, what would you expect to happen if they had added 200 units of capital instead? O It is impossible to tell what would happen GDP would increase by less than another $1,000 per person GDP would increase by another $1,000 per person GDP would increase by more than another $1,000 per person