Description
This is a EC 402 problem set. Please finish this assignment in 20 hours. Thank you .
Unformatted Attachment Preview
Purchase answer to see full attachment
Explanation & Answer
Hello fam, please find attached. This is the final copy of all answered questions. The answers and calculations are highlited in red.
For the first 2 questions: Suppose that income (output) grows at 3%, capital grows at 2%, and
labor grows at 1 percent. Suppose
1. What is the productivity growth
Answer: The Solow Residual Model (productivity growth model=
𝑔𝑎 = 𝑔𝑟 − ∅𝑔𝑘 − (1 − ∅)𝑔𝑛
gr= 3%
Ø= 1/3
gn=2%
Thus, ga= 3%-(1/3)*2%- (1-1/3)*1%
Ga=3%-2/3-2/3
=1.67%
Productivity growth=1.675
Correct Answer is option C
2. What fraction of output growth is contributed by capital?
𝑂𝑢𝑡𝑝𝑢𝑡 𝑔𝑟𝑜𝑤𝑡ℎ = 3%
𝐶𝑎𝑝𝑖𝑡𝑎𝑙 = 2%
3−2= 1
½ = 0.5 𝑜𝑟 50%
Answer is 50% option B
3. What is the growth of income per capita (income per worker)
𝑇ℎ𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 𝑔𝑟𝑜𝑤𝑡ℎ 𝑝𝑒𝑟 𝑐𝑎𝑝𝑖𝑡𝑎 𝑖𝑛 𝑡ℎ𝑒 𝑚𝑜𝑑𝑒𝑙 𝑔𝑟 − 𝑔𝑛 = 𝑔𝑎 + ∅𝑔𝑘 − ∅𝑔𝑛
𝑇ℎ𝑒𝑟𝑒𝑓𝑜𝑟𝑒, 1.67% + 1/3(2% − 1%)
= 1.67% + 1.33% = 2%
𝑇ℎ𝑒 𝑔𝑟𝑜𝑤𝑡ℎ 𝑜𝑓 𝑖𝑛𝑐𝑜𝑚𝑒 𝑝𝑒𝑟 𝑐𝑎𝑝𝑖𝑡𝑎 𝑖𝑠 2%
𝑇ℎ𝑒 𝑐𝑜𝑟𝑟𝑒𝑐𝑡 𝑎𝑛𝑠𝑤𝑒𝑟 𝑖𝑠 𝑜𝑝𝑡𝑖𝑜𝑛 𝐶
4. In the Romer Model, productivity improvement continues indefinitely if?
Correct answer is option D-Old ideas help generate new ideas.
5. Which one of the following statements is true about Total Factor Productivity (TFP)
All the options in this question are correct, TFP is the fraction of output that cannot be
explained by factor inputs, TFP is the most important factor in accounting for low
output per worker in poor countries and resource misallocation across firms can be a
reason for low TFP.
Correct Answer is thus option D.
6. Read the article “The Productivity Puzzle”, which one of the following is a reason
that the U.S has experienced a decline in productivity growth since 2014?
Correct answer is C- The article explains that it takes time to translate technological
advances into productivity gains.
7. Consider the effect of giving aid to a developing economy in the Romer model with
spillovers. Let a be the amount of aid per person given each year. “Total income
available” for a country is then Y + aN, where Y is the amount of total output.
Describe what happens in a Romer economy wi...