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Econ_314_1_Simulated_Prelim_1A

# Econ_314_1_Simulated_Prelim_1A - 1 Econ 314 1 Simulated...

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1 Econ 314 – 1 Simulated first prelim Instruction. Do five of the following six problems. If you have tried more, mark DNG the problem you do not want to be graded. Otherwise, the last problem would not be graded. Problem 1. The aggregate production function has the form, Y = A K 1/4 N 3/4 , A = 4, s = 1/4, n = 1/2 = d. (a) Find the long-term equilibrium value of capital per worker. (b) Currently, the output per worker is 1/4, would capital per worker rise or fall? (c) What is the Golden –Rule capital per worker in this case? (d) Overheard, “Under any degree of belt-tightening in the present, future output per capita can never reach 8.” Agree? Problem 2. I. Consider an open economy which produces petroleum, where CA = 0 for the recent past. Now, there is a very strong world market demand for its oil. What the future will bring, there are two competing schools of thought: (a) The current oil shortage is due to the lack of security in the Iraqi fields, the antiquated

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Econ_314_1_Simulated_Prelim_1A - 1 Econ 314 1 Simulated...

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