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University of Southern California
Department of Economics
ECON 205 Principles of Macroeconomics
Spring 2009
Prof. Safarzadeh
Assignment # 4
Student Name
:_________________
I. Answer the Following questions:
1.
You read in the paper that real per capita GDP is growing at a rate of 3.5%.
During the same period, capital per
unit of labor is growing at a rate of 2.4%.
Use the Solow’s 1/3 rule to find the contribution of capital per worker (K/
N) growth to per capita GDP (Y/N) growth ______________________.
What is the contribution of productivity to
per capita GDP growth? _______________________.
If labor is growing at a rate of 1.5%, what is the rate of
growth of capital at this time? _____________ What is the rate of real GDP growth at this time? _______________.
Now, suppose that the economy is at the steady state equilibrium.
What will be the rate of growth of capital per
worker (K/N) at the steady state equilibrium? ____________________ What will be the rate of per capita GDP
(Y/
N) growth at the steady state equilibrium?
What will be the rate of growth of capital (K) at the steady state
equilibrium? ____________________ What will be the rate of GDP growth at the steady state equilibrium?
2.
Banana Republic’s real per capita GDP is growing at a rate of 2.5%.
During the same period, capital per unit of
labor is growing at a rate of 1.5%. Use the Solow’s 1/3 rule to find the contribution of capital per worker (K/N)
growth to per capita GDP (Y/N) growth ______________________.
What is the contribution of productivity to per
capita GDP growth? _______________________.
If labor is growing at a rate of 1.5%, what is the rate of growth
of capital at this time? _____________ What is the rate of real GDP growth at this time? _______________.
Now,
suppose that the economy is at the steady state equilibrium.
What will be the rate of growth of capital per worker
(K/N) at the steady state equilibrium? ____________________ What will be the rate of per capita GDP
(Y/N)
growth at the steady state equilibrium?
What will be the rate of growth of capital (K) at the steady state
equilibrium? ____________________ What will be the rate of GDP growth at the steady state equilibrium?
3.
What is the role of population growth in the classical growth model?
Specifically, what is the main determinant
of population growth in the classical model? __________________________.
What is the relationship between the
population growth and capital per unit of labor?
___________________________________________________________________________.
What is the relationship between the population growth and real per capita GDP growth?
________________________________________________________________________.
What is the relationship between population growth and the steady state at the classical model (what makes the
economy stay at the steady state).
___________________________________________________________________________.
What is the role of the population growth in the neoclassical growth model?
Specifically, what is the main
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determinant of population growth in the neoclassical model?
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 Spring '07
 KAMRANY
 Macroeconomics, Steady State, Inflation, Monetary Policy, Fractionalreserve banking, per capita

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