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# ps6ans - ECON 305 INTERMEDIATE MACROECONOMICS SPRING 2008...

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ECON 305: INTERMEDIATE MACROECONOMICS SPRING 2008 MARK MOORE PROBLEM SET 6: SOLUTIONS A. CHAPTER 10 1. a. True. b. True. c. False. d. False. e. True. f. False. g. True. h. Uncertain. 2. a. Example: France: (1.04) 50 *5,519=\$39.2 k. Japan: \$85.8 k; UK: \$25.0 k; U.S.: \$34.7 k b. 2.47 c. For Japan, yes; for France and the UK, no. 3. a. \$5,000 b. 6000 pesos c. \$600 d. \$800 e. Mexican standard of living relative to the U.S.—exchange rate method: 600/5000 =.12; PPP method: 800/5000=.16 4. a. Y=63 b. Y doubles. c. Yes. d. Y/N=(K/N) 1/2 e. K/N=4 implies Y/N=2. K/N=8 implies Y/N=2.83. Output less than d doubles. f. No.

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g. No. In part (f), we are looking at what happens to output when we increase capital only, not capital and labor in equal proportion. There are decreasing returns to capital. h. Yes. 5. a. Y/Y = .5 K/K growth rate of output = 1/2 growth rate of capital b. 4 % c. K/Y increases. d. No. Since capital is growing faster than output, the saving rate will have to increase to maintain the same pace. Eventually, the required saving will exceed output. Capital must grow faster than output because there are decreasing returns to capital in the production function.
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ps6ans - ECON 305 INTERMEDIATE MACROECONOMICS SPRING 2008...

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