# HW2 answers - Name SID Discussion Section Problem Set#2...

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Problem Set #2 ANSWERS (Spring 2008) 1/6 Name: _______________________ SID: _______________________ Discussion Section: _______________________ Problem Set #2 ANSWERS Due Tuesday, February 19, 2008 QUESTIONS A. Multiple Choice Questions . Circle the letter corresponding to the best answer. (1 points each.) 1. Over the past year, productivity grew 2.0%, the capital stock grew 1.0%, and labor grew 1.0%. If the elasticities of output with respect to capital and labor are 0.2 and 0.8, respectively, how much did output grow? a. 1.0% b. 2.0% c. 3.0% d. 4.0% 2. If capital and labor each grow by 5.0% in a year, the elasticities of output with respect to capital and labor sum to one, and productivity grows 2.0% in the year, by how much does output grow during the year? 3. Total factor productivity growth is that part of economic growth due to: 4. Over the past year, output grew 4.0%, capital grew 2.0%, and labor grew 1.0%. If the elasticities of output with respect to capital and labor are 0.3 and 0.7, respectively, how much did productivity grow?

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Problem Set #2 ANSWERS (Spring 2008) 2/6 5. The per-worker production function in the Solow model assumes: a. Constant returns to scale and increasing marginal productivity of capital. b. Constant returns to scale and diminishing marginal productivity of capital. c. Increasing returns to scale and diminishing marginal productivity of capital. d. Decreasing returns to scale ad diminishing marginal productivity of capital. 6. In a steady state:
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• Spring '08
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