Problem Set #3 (Fall 2006)

Problem Set #3 (Fall 2006) - Problem Set#3(Fall 2006 1 Name...

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Unformatted text preview: Problem Set #3 (Fall 2006) 1 Name: _______________________ SID: _______________________ Discussion Section: _______________________ Problem Set #3 Due Tuesday, September 26, 2006 Problem Sets MUST be word-processed except for graphs and equations. QUESTIONS 1. In 2004, Germany’s rate of capital accumulation was much slower than its labor force growth. In addition, the government had a large budget deficit. Based only on this information, use a Solow Growth Model diagram to clearly show the economy’s steady state as well as its actual (i.e., 2004) situation. Be sure to discuss what is happening to the level of income-per-worker and to the rate of economic growth in 2004. As a result of this situation, the German government initiated a series of labor market reforms in 2005, including a longer workweek and increased flexibility in hiring and firing decisions. Additionally, in order to provide more incentives for the unemployed to return to work, and to deal with the burgeoning deficit,...
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