Tutorial 7

# Tutorial 7 - INTERMEDIATE MACROECONOMICS(ECON 633 TUTORIAL...

• 13

This preview shows pages 1–5. Sign up to view the full content.

INTERMEDIATE MACROECONOMICS (ECON 633) TUTORIAL 7

This preview has intentionally blurred sections. Sign up to view the full version.

1. Suppose that the economy’s production function is Y=K 0.5 (AN) 0.5 and that the saving rate (s) is equal to 16% and that the rate of depreciation (d) is equal to 10%. Further, suppose that the number of workers grows at 2% per year and that the rate of technological progress is 4% per year. a. Find the steady-state values of The capital stock per effective worker : K/(AN) = (s/(δ+gA+gN))2= 1 Output per effective worker : Y/(AN)= (K/AN)1/2=1 The growth rate of output per effective worker : gY/(AN)= 0 The growth rate of output per worker : gY/N=gA=4% The growth rate of output : gY=gA+gN=6%
b. Suppose that the rate of technological progress doubles to 8% per year. Recompute the answers to part (a). Explain. i. K/(AN) = (s/(δ+gA+gN))2= 0.64 ii. Y/(AN)= (K/AN)1/2=0.8 iii. gY/(AN)= 0 iv. gY/N=gA=8% v. gY=gA+gN=10%

This preview has intentionally blurred sections. Sign up to view the full version.

c. Now suppose that the rate of technological progress is still equal to 4% per year, but the number of workers now grows at 6% per year. Recalculate the answers to (a). Are people better off in (a) or
This is the end of the preview. Sign up to access the rest of the document.
• Fall '15

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern