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Problem Set #2
Due Tuesday, February 19, 2008
Problem Sets MUST
be wordprocessed except for graphs and equations. When drawing diagrams, the following
rules apply:
1.
Completely
, clearly
and accurately
label all axis, lines, curves, and equilibrium points.
2.
The original diagram and any equilibrium points MUST
be drawn in black or pencil.
3.
The first change in any variable, curve, or line and any new equilibrium points MUST
be drawn in red.
4.
The second change in any variable, curve, or line and any new equilibrium points MUST
be drawn in blue.
5.
The third change in any variable, curve, or line and any new equilibrium points MUST
be drawn in green.
Problem Set #2 (Spring 2008)
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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?
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 Spring '08
 Wood
 Economics, a. b. c., capitaltolabor ratio

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