section5 - Econ 100B Section 101 & 102 Summer 2009 UC...

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Econ 100B Section 101 & 102 Summer 2009 – UC Berkeley Phakawa On Jeasakul July 8, 2009 Practice Problems 1. (Fall 2009) In the country of Akinback, an economy that can be described by the Solow Growth Model, income-per-worker is falling. Suddenly, a highly contagious disease kills one half of the younger workers in the labor force. The disease then quickly disappears. Other workers were not affected by the disease. Depreciation rates were not affected. However, in Akinback, younger workers have more job skills and higher saving rates than older workers. a. Based only on this information, use a Solow Growth Model diagram to accurately and clearly show: i. The economy’s initial economic situation, ii. The effect of the disease on the Akinback’s capital-to-labor ratio and income-per- worker, and iii. Akinback’s final steady state. b. Provide a brief economic explanation/description of: i. The capital-to-labor ratio, the level of income-per-worker, and the rate of economic growth at the economy’s initial economic situation, ii. Why you made the changes you have shown in your diagram above, iii. The adjustment process that occurs during the transition period from the economy’s initial economic situation to its final steady state, and iv. The capital-to-labor ratio, the level of income-per-worker, and the rate of economic growth at the economy’s final steady state.
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This note was uploaded on 09/08/2009 for the course ECON 100B taught by Professor Wood during the Summer '08 term at University of California, Berkeley.

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section5 - Econ 100B Section 101 & 102 Summer 2009 UC...

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