University of Saskatchewan Department of Economics Economics Homework #1


 Monica Parker
 2 years ago
 Views:
Transcription
1 Homework #1 1. In 1900 GDP per capita in Japan (measured in 2000 dollars) was $1,433. In 2000 it was $26,375. (a) Calculate the growth rate of income per capita in Japan over this century. (b) Now suppose that Japan grows at the same rate for 21st century. What will Japanese GDP per capita be in the year 2100? 2. In 2013 GDP per capita in the United States was $53,001 while GDP per capita in Bangladesh was $3,167. Income per capita in the United States has been growing at a constant rate of 1.9% per year. Calculate the year in which income per capita in the United States was equal to year 2013 income per capita in Bangladesh. 3. Relation between productivity (output per worker) and income per capita. Call L the number of workers (labour force), F the number of people of working age, and N total population. We usually assume no unemployment in the long run. Productivity, y; equals output per worker (y = Y=L) while income per capita, let us call it i; equals output per person (i = Y=N): The labour force participation ratio, l, is the proportion of people in the labour force to people of working age (l = L=F ) while the dependency ratio, d; is the proportion of total population to population of working age (d = N=F ). Therefore, Y N = Y L F L F N i = y l d (a) What is the relation between an increase in productivity and an increase in income per capita? (b) Suppose that population growth in Ameropa decreases from and, as a consequence, productivity increases by 3%. The population growth does not a ect the labour force participation ratio but it a ects the dependency ratio. Suppose that the dependency ratio decreases by 8% because there are fewer children. Calculate the total e ect on income per capita of the demographic change; i.e., calculate the combined e ect of the increase in productivity and of the change in the dependency ratio. 1
2 (c) Suppose again that population growth decreases and, as a consequence, productivity increases by 3%. However, suppose instead that the population becomes older and the dependency ratio increases by 6%. What is in this case the total e ect on income per capita of the demographic change: i.e., the combined e ect of the increase in productivity and of the change in the dependency ratio? (d) Suppose now that in case c. the government, worried about the aging of the population, encourages women to work outside the home with the e ect that the labour force participation ratio increases by 4%. What is the total e ect on the measured income per capita of the demographic change plus the government action? 4. The growth rate of aggregate productivity (sectoral composition). Suppose that the economy is composed of two sectors, agriculture and manufacture, whose production functions are, respectively, and Y A = B A L A Y M = B M L M where L A and L M (L A + L M = L) are the quantities of labour used in each sector and B A and B M the productivities of each sector. The total quantity of output is Y = Y A + Y M. The aggregate level of productivity in the economy is de ned as B = Y L = B AL A L + B M L M : L Show that the growth rate of aggregate productivity is a weighted average of the growth rates of the productivity in the two sectors where the weights are the sectors share of total output. (Hint: rst, calculate B _ keeping quantities of labour constant; second, divide by B to obtain B=B; _ nally, multiply and divide each term by the productivity in each sector.) 2
3 Homework #2 1. Consider the Solow model without technical progress. In class we derived the steadystate values for capital per worker (k ) and output per worker (y ) as a function of saving rate (s), population rate (n), and depreciation rate (d): (a) Suppose that s = 20%; n = 1% and d = 10%: Calculate k ; y and consumption per worker (c ). (b) Repeat the exercise for s = 20%; n = 4% and d = 10%. What do you observe as compared to your answer in part (a)? Comment. (c) Now suppose that saving rate raises permanently from 20% to 30% (n = 1% and d = 10%). How does this increase in the saving rate a ect k ; y and c? (Again, compare to your answer in part (a).) 2. Output per worker (labour productivity) is de ned as y = Y =L: Show that the growth rate in labour productivity depends on growth in total factor productivity and growth in the capitallabour ratio (k = K=L). In particular, show that _y y = B _ B + k _ k : 3. Suppose an economy described by the Solow model is in a steady state with population growth n of 1.1 percent per year and technological progress g of 1.5 percent per year. Total capital and total output grow at 2.6 percent per year. Suppose further that the capital share of output is 0.4. If you used the growth accounting equation to divide output growth into three sources capital, labour, and total factor productivity, how much would you attribute to each source? 4. In the economy of Solovia, the owners of capital receive 70% of national income, and the workers receive 30%. (a) The men of Solovia stay at home performing household chores, while the women work in factories. If some of the men decided to start working outside of the home so that the labour force increases by 4 percent, what would happen to the measured output of the economy? (Hint: use the growth accounting equation). (b) In year 1, the capital stock was 6, the labour input was 3, and output was 12. In year 2, the capital stock was 7, the labour input was 4, and output was 14. What happened to total factor productivity growth between the two years? 3
4 Homework #3 1. We have seen in class Kaldor s stylized facts of growth in developed countries (a) The factor distribution of income shows no trend (b) GDP per capita exhibits steady and sustained growth (c) The ratio of capital to output shows no trend (d) The real rate of return to capital shows no trend (e) Wages exhibit sustained growth The CobbDouglas production function is used to replicate fact a. In this exercise, you are asked to show that the steady state in the Solow model with technological progress replicates facts b, c, d, and e. (Hints: start with the equations in p. 40; and remember the factor distribution of income.) 2. Problem 1 of chapter 3 (page 75) 3. Unemployment and growth. Consider how unemployment would affect the Solow growth model. Suppose that output is produced according to the production function Y = K [(1 u )L] 1, where u is the natural rate of unemployment. There is no technological progress. Assume again that the labour force equals population. (a) Express output per worker, y; as a function of capital per worker, k, and the natural rate of unemployment. Describe the steady state of this economy. (b) Suppose that some change in government policy reduces the natural rate of unemployment. Describe how this change a ects output both immediately and over time. Is the steadystate e ect on output larger or smaller than the immediate e ect? Explain (Your answer should include a graph). 4. Problem 6 in chapter 3 (page 77) 4
5 Homework #4 1. Consider the Solow model with population growth but no technical progress. Assume that the savings rate can take two di erent values s 1 and s 2 ; where s 1 > s 2. The savings rate depends on the level of output per capita (and therefore the level of capital per capita). Speci cally, the savings rate equals s 2 when output per capita is below a certain threshold, y < y; (when k < k) and increases to s 1 when output per capita is at or above this threshold, y y (when k k). Draw a diagram for this model. Assume that (n + d) k < s 1 y and that (n + d) k > s 2 y: Explain what the diagram says about the steady state of this model. 2. Consider the model of technology and growth presented in Chapter 5. Suppose that L = 1; = 0:2; = 1; = 1 and s R = 0:1: (a) Calculate the growth rate of output per worker. (b) Now suppose that s R is trebled. Calculate the new growth rate of output per worker. How many years will it take before output per worker returns to the level it would have reached if s R had remained constant? 3. Consider the original Lucas endogenous growth model where the production function is given by: Y = K (hl) 1 where h is average human capital (human capital per worker). As you can see h ful lls here the same role as A does in the original Solow model. Therefore, the growth rate of the economy (output per worker) in the balanced growth path equals the growth rate of the (average) human capital. Lucas assumes that human capital evolves according to _h = uh where u is the (average) fraction of our lifetime spent accumulating human capital. (a) What is the growth rate of (average) human capital? What is the growth rate of output per worker? (b) We have not studied this model as it is in class because empirical evidence rejects this model (we have studied a variation of it). Taking into consideration your answer in part a. and your knowledge about di erent growth rates across countries, explain why empirical evidence rejects this model as stated. 5
6 4. Population Growth and Technological Change since 1 million B.C. In his 1993 paper, Kremer introduces a couple of variations in the Solow model to replicate the time series of average annual population growth rate that he constructs and it is shown in page 92 of your textbook. The rst variation is to assume that output is a function of the xed stock of land and labour, rather than capital and labour. The second is to assume that population adjusts so output per person equals the subsistence level y: According to Echevarria (1998), the share of labour if the rst sector is Normalize y to be equal to 1 unit and assume the quantity of land to equal 370 million units. (a) Solve analytically (mathematically) for the level of global population. (b) Suppose that there were no TFP growth in the rst sector (normalize TFP or labour e ciency to one). What would the steady state level of global population (the level around which population would have uctuated) have been given these parameters? (c) If TFP growth is positive, what is the relation between population growth and rate of technical progress in the rst sector, according to your answer to a. (d) According to Echevarria (1998), the rate of TFP growth in the rst sector is 0:0035 = 0:35%. What was the average growth rate of global population until these Malthusian/Darwinian population dynamics broke down? 6
7 Homework #5 1. Consider an extension of the Solow model without technological progress that encompasses a second type of capital, government capital, which consists of publicly funded infrastructure such as roads and ports. Let x denote the quantity of government capital per worker. The economy s production function (in perworker terms) equals y = k x : The government collects a fraction of national income in taxes and spends all of this revenue producing government capital. The laws of motion" for government and physical capital are thus _x = y x _k = s(1 )y k: (a) Solve for the steady state level of output per worker (b) What value of will maximize output per worker in the steady state? 2. This problem, similar to Problem 5 in chapter 6, considers the e ect on an economy s technological sophistication of an increase in the investment in human capital. It looks at the shortrun and longrun e ects on h of an increase in u (fraction of an average individuals s working lifetime spent learning skills). As in the previous problem, assume = 1: (a) Starting from the steady state, analyze the shortrun and the longrun e ects of an increase in u on the growth rate of h. (b) Plot the behaviour of h=a over time. (c) Plot the behaviour of h(t) over time. (d) How does the model explain the di erences in growth rates that we observe across countries? 3. The drag of a xed resource. Let us assume that a xed amount of land, N, is available for production each period and output is produced according to Y = BK N L 1 : Nordhaus (1992) calculates land s share of output to be 10%. According to national accounts, gross capital income is about 30% of GDP in industrialized countries. Both productivity (output per worker) and labour have grown roughly at 2% during the last century in these countries. It is one of the Kaldor s facts that capital and output grow at the same rate in industrialized countries. 7
8 (a) Compute TFP (total factor productivity) growth in industrialized countries for the last century. (b) Now use the usual CobbDouglas production function with just two factors, capital and labour, to perform the same exercise. Is your measure of TFP growth in this case higher or lower than in case a? Are we underestimating or overestimating TFP growth by not taking into account the e ects on growth of a xed resource? By how much according to your calculations? 4. A technology transfer model. According to the model in chapter 6, income per capita equals y = k h 1 ; where h refers to human capital per person. New technologies can only be adopted if the average worker has enough human capital to use them; thus, as a working assumption, we equate technological level to human capital and, therefore, h refers to the technological level as well. New technologies are developed in the frontier: A refers to both the labour e ciency and the technological levels at the frontier. Improvements in the country s technology, h, on the other hand, are made by learning from the frontier s technology: _h h = e u A : h (a) According to the same model, the equation for the technological level, h, is as follows: 1= h = g e u A; where refers to the degree of openness of the economy and is the parameter that determines transfer of knowledge, depending on the distance to the frontier. Use the above equations for income per capita and the technological level to generate an expression of growth in income per capita as a function of growth of technical progress at the frontier, growth of capital per capita in this country, and change in average years of schooling. (Assume and g to be constant.) (b) Two Spanish researchers, de la Fuente and Domenech (2002), regress growth in per capita income versus growth in capital per capita and change in average years of schooling. They nd the coe cient for change in average years of schooling to be 0.5. Use this value and your answer to part a of this problem to nd an estimate of : (c) Suppose that the distance to the frontier decreases by 2%. What happens to the rate of technological progress in this country? (Hint: remember that the exponent in an exponential function is close to the elasticity). 8
9 5. A renewable resource. The natural growth of sh in a lake, G = S (100 S) ; 100 where S is the stock of sh; i.e., natural growth is a humpshaped function of the stock, as with many renewable resources. The change in stock _S = G H where H refers to the quantity of sh harvested. Thus, to keep the stock stable, H should equal G and this harvest then constitutes a sustainable yield. (a) Calculate the maximum sustainable yield. (b) The stock that yields this maximum is called the optimal stock. What is the optimal stock of sh in this lake? 9
The Solow Model. Savings and Leakages from Per Capita Capital. (n+d)k. sk^alpha. k*: steady state 0 1 2.22 3 4. Per Capita Capital, k
Savings and Leakages from Per Capita Capital 0.1.2.3.4.5 The Solow Model (n+d)k sk^alpha k*: steady state 0 1 2.22 3 4 Per Capita Capital, k Pop. growth and depreciation Savings In the diagram... sy =
More informationEconomic Growth. (c) Copyright 1999 by Douglas H. Joines 1
Economic Growth (c) Copyright 1999 by Douglas H. Joines 1 Module Objectives Know what determines the growth rates of aggregate and per capita GDP Distinguish factors that affect the economy s growth rate
More informationEndogenous Growth Theory
Endogenous Growth Theory Motivation The Solow and Ramsey models o er valuable insights but have important limitations: Di erences in capital accummulation cannot satisfactorily account for the prevailing
More informationReview Questions  CHAPTER 8
Review Questions  CHAPTER 8 1. The formula for steadystate consumption per worker (c*) as a function of output per worker and investment per worker is: A) c* = f(k*) δk*. B) c* = f(k*) + δk*. C) c* =
More informationPreparation course MSc Business&Econonomics: Economic Growth
Preparation course MSc Business&Econonomics: Economic Growth TomReiel Heggedal Economics Department 2014 TRH (Institute) Solow model 2014 1 / 27 Theory and models Objective of this lecture: learn Solow
More information( ) = ( ) = ( + ) which means that both capital and output grow permanently at a constant rate
1 Endogenous Growth We present two models that are very popular in the, socalled, new growth theory literature. They represent economies where, notwithstanding the absence of exogenous technical progress,
More informationSolution to Individual homework 2 Revised: November 22, 2011
Macroeconomic Policy Fabrizio Perri November 24 at the start of class Solution to Individual homework 2 Revised: November 22, 2011 1. Fiscal Policy and Growth (50p) After reviewing the latest figures of
More informationGreat Depressions from a Neoclassical Perspective. Advanced Macroeconomic Theory
Great Depressions from a Neoclassical Perspective Advanced Macroeconomic Theory 1 Review of Last Class Model with indivisible labor, either working for xed hours or not. allow social planner to choose
More informationEconomic Growth. Chapter 11
Chapter 11 Economic Growth This chapter examines the determinants of economic growth. A startling fact about economic growth is the large variation in the growth experience of different countries in recent
More informationDevelopment Economics Lecture 5: Productivity & Technology
Development Economics Lecture 5: Productivity & Technology Måns Söderbom University of Gothenburg mans.soderbom@economics.gu.se www.soderbom.net 1 Measuring Productivity Reference: Chapter 7 in Weil. Thus
More informationVI. Real Business Cycles Models
VI. Real Business Cycles Models Introduction Business cycle research studies the causes and consequences of the recurrent expansions and contractions in aggregate economic activity that occur in most industrialized
More informationEndogenous Growth Models
Endogenous Growth Models Lorenza Rossi Goethe University 20112012 Endogenous Growth Theory Neoclassical Exogenous Growth Models technological progress is the engine of growth technological improvements
More informationChapter 3 A Classical Economic Model
Chapter 3 A Classical Economic Model what determines the economy s total output/income how the prices of the factors of production are determined how total income is distributed what determines the demand
More informationName: Date: 3. Variables that a model tries to explain are called: A. endogenous. B. exogenous. C. market clearing. D. fixed.
Name: Date: 1 A measure of how fast prices are rising is called the: A growth rate of real GDP B inflation rate C unemployment rate D marketclearing rate 2 Compared with a recession, real GDP during a
More informationEconomics 304 Fall 2014
Economics 304 Fall 014 CountryAnalysis Project Part 4: Economic Growth Analysis Introduction In this part of the project, you will analyze the economic growth performance of your country over the available
More informationMacroeconomics Lecture 1: The Solow Growth Model
Macroeconomics Lecture 1: The Solow Growth Model Richard G. Pierse 1 Introduction One of the most important longrun issues in macroeconomics is understanding growth. Why do economies grow and what determines
More informationMacroeconomics 2. In ation, unemployment and aggregate supply. Mirko Wiederholt. Goethe University Frankfurt. Lecture 10
Macroeconomics 2 In ation, unemployment and aggregate supply Mirko Wiederholt Goethe University Frankfurt Lecture 10 irko Wiederholt (Goethe University Frankfurt) Macroeconomics 2 Lecture 10 1 / 22 1.
More informationUNIVERSITY OF OSLO DEPARTMENT OF ECONOMICS
UNIVERSITY OF OSLO DEPARTMENT OF ECONOMICS Exam: ECON4310 Intertemporal macroeconomics Date of exam: Thursday, November 27, 2008 Grades are given: December 19, 2008 Time for exam: 09:00 a.m. 12:00 noon
More informationPractice Problems on Production Function and Labor Market
Practice Problems on Production Function and Labor Market 1 What is a production function? What are some factors that can cause a nation s production function to shift over time? What do you have to know
More informationEXOGENOUS GROWTH MODELS
EXOGENOUS GROWTH MODELS Lorenza Rossi Goethe University 20112012 Course Outline FIRST PART  GROWTH THEORIES Exogenous Growth The Solow Model The Ramsey model and the Golden Rule Introduction to Endogenous
More informationk = sf(k) (δ + n + g)k = 0. sy (δ + n + g)y 2 = 0. Solving this, we find the steadystate value of y:
CHAPTER 8 Economic Growth II Questions for Review 1. In the Solow model, we find that only technological progress can affect the steadystate rate of growth in income per worker. Growth in the capital
More informationIntermediate Macroeconomics
Intermediate Macroeconomics Lecture 2  Growth Facts & the Malthusian Model Zsófia L. Bárány Sciences Po 2014 January Hall and Jones 1999, QJE: In 1988 output per worker in the United States was more than
More informationEconomic Growth I: Capital Accumulation and Population Growth
CHAPTER 8 : Capital Accumulation and Population Growth Modified for ECON 2204 by Bob Murphy 2016 Worth Publishers, all rights reserved IN THIS CHAPTER, YOU WILL LEARN: the closed economy Solow model how
More information14.452 Economic Growth: Lectures 2 and 3: The Solow Growth Model
14.452 Economic Growth: Lectures 2 and 3: The Solow Growth Model Daron Acemoglu MIT November 1 and 3, 2011. Daron Acemoglu (MIT) Economic Growth Lectures 2 and 3 November 1 and 3, 2011. 1 / 96 Solow Growth
More information6.2 The Economics of Ideas. 6.1 Introduction. Growth and Ideas. Ideas. The Romer model divides the world into objects and ideas: Chapter 6
The Romer model divides the world into objects and ideas: Chapter 6 and Ideas By Charles I. Jones Objects capital and labor from the Solow model Ideas items used in making objects Media Slides Created
More informationReal Business Cycle Theory. Marco Di Pietro Advanced () Monetary Economics and Policy 1 / 35
Real Business Cycle Theory Marco Di Pietro Advanced () Monetary Economics and Policy 1 / 35 Introduction to DSGE models Dynamic Stochastic General Equilibrium (DSGE) models have become the main tool for
More informationEcon 102 Aggregate Supply and Demand
Econ 102 ggregate Supply and Demand 1. s on previous homework assignments, turn in a news article together with your summary and explanation of why it is relevant to this week s topic, ggregate Supply
More informationQ = ak L + bk L. 2. The properties of a shortrun cubic production function ( Q = AL + BL )
Learning Objectives After reading Chapter 10 and working the problems for Chapter 10 in the textbook and in this Student Workbook, you should be able to: Specify and estimate a shortrun production function
More informationMASTER IN ENGINEERING AND TECHNOLOGY MANAGEMENT
MASTER IN ENGINEERING AND TECHNOLOGY MANAGEMENT ECONOMICS OF GROWTH AND INNOVATION Lecture 1, January 23, 2004 Theories of Economic Growth 1. Introduction 2. Exogenous Growth The Solow Model Mandatory
More informationCHAPTER 7 Economic Growth I
CHAPTER 7 Economic Growth I Questions for Review 1. In the Solow growth model, a high saving rate leads to a large steadystate capital stock and a high level of steadystate output. A low saving rate
More informationName: Final Exam Econ 219 Spring You can skip one multiple choice question. Indicate clearly which one
Name: Final Exam Econ 219 Spring 2005 This is a closed book exam. You are required to abide all the rules of the Student Conduct Code of the University of Connecticut. You can skip one multiple choice
More informationMA Macroeconomics 10. Growth Accounting
MA Macroeconomics 10. Growth Accounting Karl Whelan School of Economics, UCD Autumn 2014 Karl Whelan (UCD) Growth Accounting Autumn 2014 1 / 20 Growth Accounting The final part of this course will focus
More informationThe Aggregate Production Function Revised: January 9, 2008
Global Economy Chris Edmond The Aggregate Production Function Revised: January 9, 2008 Economic systems transform inputs labor, capital, raw materials into products. We use a theoretical construct called
More informationMACROECONOMICS SECTION
MACROECONOMICS SECTION Directions: Answer both parts, A and B; there is some choice in each part. Points will be proportional to the time limits indicated. Part A Short Answer Choose two (2) of the following.
More informationOur development of economic theory has two main parts, consumers and producers. We will start with the consumers.
Lecture 1: Budget Constraints c 2008 Je rey A. Miron Outline 1. Introduction 2. Two Goods are Often Enough 3. Properties of the Budget Set 4. How the Budget Line Changes 5. The Numeraire 6. Taxes, Subsidies,
More informationThis paper is not to be removed from the Examination Halls
This paper is not to be removed from the Examination Halls UNIVERSITY OF LONDON EC2065 ZA BSc degrees and Diplomas for Graduates in Economics, Management, Finance and the Social Sciences, the Diplomas
More informationAgenda. LongRun Economic Growth, Part 1. The Sources of Economic Growth. LongRun Economic Growth. The Sources of Economic Growth
Agenda The Sources of Economic Growth LongRun Economic Growth, Part 1 Growth Dynamics: 81 82 LongRun Economic Growth Countries have grown at very different rates over long spans of time. The Sources
More informationChapter 6: Economic Growth: Malthus to Solow
Chapter 6: Economic Growth: Malthus to Solow Elhadj Bah EC 313Intermediate Macroeconomics Second Summer Session Arizona State University July, 2007 1 Economic Growth Facts 1. Pre1800 (Industrial Revolution):
More informationA. GDP, Economic Growth, and Business Cycles
ECON 3023 Hany Fahmy FAll, 2009 Lecture Note: Introduction and Basic Concepts A. GDP, Economic Growth, and Business Cycles A.1. Gross Domestic Product (GDP) de nition and measurement The Gross Domestic
More informationAnswer Key to the Sample Final Exam Principles of Macroeconomics Professor Adrian PeraltaAlva University of Miami
True/false and explain Answer Key to the Sample Final Exam Principles of Macroeconomics Professor Adrian PeraltaAlva University of Miami State whether the following statements are true or false and explain
More informationHandout on Growth Rates
Economics 504 Chris Georges Handout on Growth Rates Discrete Time Analysis: All macroeconomic data are recorded for discrete periods of time (e.g., quarters, years). Consequently, it is often useful to
More informationIntermediate Macroeconomics
Intermediate Macroeconomics Lecture 1  Introduction to Economic Growth Zsófia L. Bárány Sciences Po 2011 September 7 About the course I. 2hour lecture every week, Wednesdays from 12:3014:30 3 big topics
More informationEconomic Growth: Theory and Empirics (2012) Problem set I
Economic Growth: Theory and Empirics (2012) Problem set I Due date: April 27, 2012 Problem 1 Consider a Solow model with given saving/investment rate s. Assume: Y t = K α t (A tl t ) 1 α 2) a constant
More informationEconomics 702 Macroeconomic Theory Practice Examination #1 October 2008
Economics 702 Macroeconomic Theory Practice Examination #1 October 2008 Instructions: There are a total of 60 points on this examination and you will have 60 minutes to complete it. The rst 10 minutes
More informationUniversity of Lethbridge Department of Economics ECON 1012 Introduction to Microeconomics Instructor: Michael G. Lanyi. Chapter 22 Economic Growth
University of Lethbridge Department of Economics ECON 1012 Introduction to Microeconomics Instructor: Michael G. Lanyi Chapter 22 Economic Growth 1) Economic growth is A) equal to real GDP per capita multiplied
More informationThis paper is not to be removed from the Examination Halls
~~EC2065 ZA d0 This paper is not to be removed from the Examination Halls UNIVERSITY OF LONDON EC2065 ZA BSc degrees and Diplomas for Graduates in Economics, Management, Finance and the Social Sciences,
More information4. Only one asset that can be used for production, and is available in xed supply in the aggregate (call it land).
Chapter 3 Credit and Business Cycles Here I present a model of the interaction between credit and business cycles. In representative agent models, remember, no lending takes place! The literature on the
More informationCONCEPT OF MACROECONOMICS
CONCEPT OF MACROECONOMICS Macroeconomics is the branch of economics that studies economic aggregates (grand totals):e.g. the overall level of prices, output and employment in the economy. If you want to
More informationEconomic Growth: Malthus and Solow
Economic Growth: Malthus and Solow Economics 3307  Intermediate Macroeconomics Aaron Hedlund Baylor University Fall 2013 Econ 3307 (Baylor University) Malthus and Solow Fall 2013 1 / 35 Introduction Two
More informationEconomic Growth: Lecture 9, Neoclassical Endogenous Growth
14.452 Economic Growth: Lecture 9, Neoclassical Endogenous Growth Daron Acemoglu MIT November 29, 2011. Daron Acemoglu (MIT) Economic Growth Lecture 9 November 29, 2011. 1 / 41 FirstGeneration Models
More informationReal Wage and Nominal Price Stickiness in Keynesian Models
Real Wage and Nominal Price Stickiness in Keynesian Models 1. Real wage stickiness and involuntary unemployment 2. Price stickiness 3. Keynesian ISLMFE and demand shocks 4. Keynesian SRAS, LRAS, FE and
More informationEcon 102 Homework #9 AD/AS and The Phillips Curve
Econ 102 Homework #9 D/S and The Phillips Curve 1. s on previous homework assignments, turn in a news article together with your summary and explanation of why it is relevant to this week s topic, D/S
More informationChapters 7 and 8 Solow Growth Model Basics
Chapters 7 and 8 Solow Growth Model Basics The Solow growth model breaks the growth of economies down into basics. It starts with our production function Y = F (K, L) and puts in perworker terms. Y L
More informationIntroduction to the Economic Growth course
Economic Growth Lecture Note 1. 03.02.2011. Christian Groth Introduction to the Economic Growth course 1 Economic growth theory Economic growth theory is the study of what factors and mechanisms determine
More informationEconomic Growth. Spring 2013
Economic Growth Spring 2013 1 The Solow growth model Basic building blocks of the model A production function Y t = F (K t, L t, A t ) This is a hugely important concept Once we assume this, then we are
More informationLecture 3: Growth with Overlapping Generations (Acemoglu 2009, Chapter 9, adapted from Zilibotti)
Lecture 3: Growth with Overlapping Generations (Acemoglu 2009, Chapter 9, adapted from Zilibotti) Kjetil Storesletten September 10, 2013 Kjetil Storesletten () Lecture 3 September 10, 2013 1 / 44 Growth
More informationECN 106 Macroeconomics 1. Lecture 6
ECN 106 Macroeconomics 1 Lecture 6 Giulio Fella c Giulio Fella, 12 ECN 106 Macroeconomics 1  Lecture 6 140/311 Roadmap for this lecture Policy implications of the longrun model Macroeconomic stylized
More informationPrinciples of Macroeconomics Prof. Yamin Ahmad ECON 202 Fall 2004
Principles of Macroeconomics Prof. Yamin Ahmad ECON 202 Fall 2004 Sample Final Exam Name Id # Part B Instructions: Please answer in the space provided and circle your answer on the question paper as well.
More information1 National Income and Product Accounts
Espen Henriksen econ249 UCSB 1 National Income and Product Accounts 11 Gross Domestic Product (GDP) Can be measured in three different but equivalent ways: 1 Production Approach 2 Expenditure Approach
More informationInterest Rates and Real Business Cycles in Emerging Markets
CENTRAL BANK OF THE REPUBLIC OF TURKEY WORKING PAPER NO: 0/08 Interest Rates and Real Business Cycles in Emerging Markets May 200 S. Tolga TİRYAKİ Central Bank of the Republic of Turkey 200 Address: Central
More informationE322_Summer_08_Intermediate Macroeconomics. Final Exam: Sample Questions
E322_Summer_08_Intermediate Macroeconomics Final Exam: Sample Questions Chapter_05 1. A competitive equilibrium is Pareto optimal if there is no way to rearrange or to reallocate goods so that (a) anyone
More informationOutline of model. Factors of production 1/23/2013. The production function: Y = F(K,L) ECON 3010 Intermediate Macroeconomics
ECON 3010 Intermediate Macroeconomics Chapter 3 National Income: Where It Comes From and Where It Goes Outline of model A closed economy, marketclearing model Supply side factors of production determination
More informationEconomics 326: Marshallian Demand and Comparative Statics. Ethan Kaplan
Economics 326: Marshallian Demand and Comparative Statics Ethan Kaplan September 17, 2012 Outline 1. Utility Maximization: General Formulation 2. Marshallian Demand 3. Homogeneity of Degree Zero of Marshallian
More informationFigure 1: Real GDP in the United States 18751993
Macroeconomics Topic 2: Explain the role of capital investment, education, and technology in determining economic growth. Reference: Gregory Mankiw s Principles of Macroeconomics, 2 nd edition, Chapter
More informationThe Real Business Cycle model
The Real Business Cycle model Spring 2013 1 Historical introduction Modern business cycle theory really got started with Great Depression Keynes: The General Theory of Employment, Interest and Money Keynesian
More informationMaster Economics & Business Understanding the World Economy. Sample Essays and Exercices
Master Economics & Business Understanding the World Economy Sample Essays and Exercices Examples of short exercises 1. Decreasing Marginal Product of Capital and Depreciation Consider two sectors using
More informationMacroeconomics Questions 2013 Economics Honors Exam
Macroeconomics Questions 2013 Economics Honors Exam Question 1. (40 minutes) The savings rates of Chinese households are among the highest in the world. This question asks you to analyze the consequences
More information. consumption and investment spending.
Chapter 10 1. The aggregate demand curve: A. is upward sloping because a higher price level is necessary to make production profitable as production costs rise. B. is downward sloping because production
More informationCharles Jones: US Economic Growth in a World of Ideas and other Jones Papers. January 22, 2014
Charles Jones: US Economic Growth in a World of Ideas and other Jones Papers January 22, 2014 U.S. GDP per capita, log scale Old view: therefore the US is in some kind of Solow steady state (i.e. Balanced
More information7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Chapter. Key Concepts
Chapter 7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Key Concepts Aggregate Supply The aggregate production function shows that the quantity of real GDP (Y ) supplied depends on the quantity of labor (L ),
More informationThe Real Business Cycle Model
The Real Business Cycle Model Ester Faia Goethe University Frankfurt Nov 2015 Ester Faia (Goethe University Frankfurt) RBC Nov 2015 1 / 27 Introduction The RBC model explains the comovements in the uctuations
More information14.452 Economic Growth: Lectures 6 and 7, Neoclassical Growth
14.452 Economic Growth: Lectures 6 and 7, Neoclassical Growth Daron Acemoglu MIT November 15 and 17, 211. Daron Acemoglu (MIT) Economic Growth Lectures 6 and 7 November 15 and 17, 211. 1 / 71 Introduction
More information2. With an MPS of.4, the MPC will be: A) 1.0 minus.4. B).4 minus 1.0. C) the reciprocal of the MPS. D).4. Answer: A
1. If Carol's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, her marginal propensity to: A) save is threefifths. B) consume is onehalf.
More informationPreTest Chapter 16 ed17
PreTest Chapter 16 ed17 Multiple Choice Questions 1. Suppose total output (real GDP) is $4000 and labor productivity is 8. We can conclude that: A. real GDP per capita must be $500. B. the pricelevel
More informationJob Generation and Growth Decomposition Tool
Poverty Reduction Group Poverty Reduction and Economic Management (PREM) World Bank Job Generation and Growth Decomposition Tool Understanding the Sectoral Pattern of Growth and its Employment and Productivity
More informationMeasuring GDP and Economic Growth
20 Measuring GDP and Economic Growth After studying this chapter you will be able to Define GDP and explain why GDP equals aggregate expenditure and aggregate income Explain how Statistics Canada measures
More informationChapter 7: Economic Growth part 1
Chapter 7: Economic Growth part 1 Learn the closed economy Solow model See how a country s standard of living depends on its saving and population growth rates Learn how to use the Golden Rule to find
More informationIntroduction. Agents have preferences over the two goods which are determined by a utility function. Speci cally, type 1 agents utility is given by
Introduction General equilibrium analysis looks at how multiple markets come into equilibrium simultaneously. With many markets, equilibrium analysis must take explicit account of the fact that changes
More informationLongRun Economic Growth. Chapter 4.3 and 4.4
LongRun Economic Growth Chapter 4.3 and 4.4 Outline Malthusian stagnation and the demographic transition The Solow growth model Ch.2 Economic Performance 1 slide 1 4.3 Malthusian Stagnation and the Demographic
More informationEconomic growth is a study of the economy in the very long run. What is economic growth?
Econ 2950 Chapter 7 Economic Growth Theory I Introduction to Economic Growth Economic growth is a study of the economy in the very long run. What is economic growth? Example: Jan 1, 2009 RGDP is $1.2 trillion
More informationThe Macroeconomy in the Long Run The Classical Model
PP556 Macroeconomic Questions The Macroeconomy in the ong Run The Classical Model what determines the economy s total output/income how the prices of the factors of production are determined how total
More informationNote on growth and growth accounting
CHAPTER 0 Note on growth and growth accounting 1. Growth and the growth rate In this section aspects of the mathematical concept of the rate of growth used in growth models and in the empirical analysis
More informationReal vs. Nominal GDP Practice
Name: Real vs. Nominal GDP Practice Period: Real verse Nominal Values Prices in an economy do not stay the same. Over time the price level changes (i.e., there is inflation or deflation). A change in the
More informationTowards a Structuralist Interpretation of Saving, Investment and Current Account in Turkey
Towards a Structuralist Interpretation of Saving, Investment and Current Account in Turkey MURAT ÜNGÖR Central Bank of the Republic of Turkey http://www.muratungor.com/ April 2012 We live in the age of
More informationPartial Fractions Decomposition
Partial Fractions Decomposition Dr. Philippe B. Laval Kennesaw State University August 6, 008 Abstract This handout describes partial fractions decomposition and how it can be used when integrating rational
More informationNominal, Real and PPP GDP
Nominal, Real and PPP GDP It is crucial in economics to distinguish nominal and real values. This is also the case for GDP. While nominal GDP is easier to understand, real GDP is more important and used
More informationTechnology and Economic Growth
Technology and Economic Growth Chapter 5 slide 0 Outline The Growth Accounting Formula Endogenous Growth Theory Policies to Stimulate Growth The Neoclassical Growth Revival Real wages and Labor Productivity
More informationFinance 30220 Solutions to Problem Set #3. Year Real GDP Real Capital Employment
Finance 00 Solutions to Problem Set # ) Consider the following data from the US economy. Year Real GDP Real Capital Employment Stock 980 5,80 7,446 90,800 990 7,646 8,564 09,5 Assume that production can
More informationA MALTHUSSWANSOLOW MODEL OF ECONOMIC GROWTH
A MALTHUSSWANSOLOW MODEL OF ECONOMIC GROWTH Luis C. Corchón Departamento de Economía Universidad Carlos III First draft December 24 th 2011. This draft November 24 th 2015 Abstract In this paper we introduce
More informationCharles I. Jones Maroeconomics Economic Crisis Update (2010 års upplaga) Kurs 407 Makroekonomi och ekonomisk politisk analys
HHS Kurs 407 Makroekonomi och ekonomisk politisk analys VT2011 Charles I. Jones Maroeconomics Economic Crisis Update Sebastian Krakowski Kurs 407 Makroekonomi och ekonomisk politisk analys Contents Overview...
More informationLong Run Economic Growth Agenda. Longrun Economic Growth. Longrun Growth Model. Longrun Economic Growth. Determinants of Longrun Growth
Long Run Economic Growth Agenda Longrun economic growth. Determinants of longrun growth. Production functions. Longrun Economic Growth Output is measured by real GDP per capita. This measures our (material)
More informationEcon 102 Economic Growth Solutions. 2. Discuss how and why each of the following might affect US per capita GDP growth:
Econ 102 Economic Growth Solutions 2. Discuss how and why each of the following might affect US per capita GDP growth: a) An increase of foreign direct investment into the US from Europe is caused by a
More informationProductioin OVERVIEW. WSG5 7/7/03 4:35 PM Page 63. Copyright 2003 by Academic Press. All rights of reproduction in any form reserved.
WSG5 7/7/03 4:35 PM Page 63 5 Productioin OVERVIEW This chapter reviews the general problem of transforming productive resources in goods and services for sale in the market. A production function is the
More informationCAPM, Arbitrage, and Linear Factor Models
CAPM, Arbitrage, and Linear Factor Models CAPM, Arbitrage, Linear Factor Models 1/ 41 Introduction We now assume all investors actually choose meanvariance e cient portfolios. By equating these investors
More informationReal GDP. Percentage of 1960 real GDP per capita. per capita. 2000 real GDP. (1996 dollars) per capita. Real GDP
KrugmanMacro_SM_Ch08.qxp 11/9/05 4:47 PM Page 99 LongRun Economic Growth 1. The accompanying table shows data from the Penn World Table, Version 6.1, for real GDP in 1996 U.S. dollars for Argentina, Ghana,
More informationFigure 1: Shift of s d as G increases S d (G=110) r S d (G=100) S d = 0.5Y+0.5T rG. I d : r. Figure 2: Shift of IS as G increases
Economics 154a, Spring 2005 Intermediate Macroeconomics Problem Set 8: Answer Key April 11, 2005 1. Do numerical problem #4 on p. 425 in Chapter 11 of the textbook: An economy is described by the following
More informationEconomics Macroeconomic Theory
Economics 202.04 Macroeconomic Theory Spring 2003 MidTerm Exam, 27 February 2003 Please answer FIVE QUESTIONS FROM SECTION A and TWO QUESTIONS FROM SECTION B. SECTION A and B each carry 50% of the marks.
More information6 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Chapter. Key Concepts
Chapter 6 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Key Concepts Aggregate Supply The aggregate production function shows that the quantity of real GDP (Y ) supplied depends on the quantity of labor (L ),
More informationTHE ECONOMY AT FULL EMPLOYMENT. Objectives. Production and Jobs. Objectives. Real GDP and Employment. Real GDP and Employment CHAPTER
THE ECONOMY AT 29 FULL EMPLOYMENT CHAPTER Objectives After studying this chapter, you will able to Describe the relationship between the quantity of labour employed and real GDP Explain what determines
More informationDebt in the U.S. Economy
Debt in the U.S. Economy Kaiji Chen z Ayşe Imrohoro¼glu zz This Version: May 2013 Abstract In 2011, the publicly held debttogdp ratio in the United States reached 68% and is expected to continue rising.
More information