Answers_to_Asst_2

Answers_to_Asst_2 - Answers - Homework Assignment #2 - ECON...

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Answers - Homework Assignment #2 - ECON 423/823 - Fall, 2008 1. Using equation (3-10), or Y/Y = g Y = σ / γ , a. 10% / 2 = 5%. b. 10% / 4 = 2.5%. c. 20% / 2 = 10%. d. 20% / 4 = 5%. Clearly, the growth rate is higher, the higher the rate of saving and the lower the capital-output ratio. 2. The population function that Malthus described is illustrated in Figure 4-2. Population growth, which is the change in population P over the level of P, or P/P, is given on the vertical axis. Note that the symbol “ ” signifies “the change in.” Real per capita income, y = Y/P, is shown on the horizontal axis. If real per capita income is above y 2 , say at y 3 , the death rate is less than the birth rate and the population grows. If real per capita income is below y 2 , such as at y 1 , the death rate is greater than the birth rate and the population shrinks. At real per capita income y 2 , the death rate is exactly equal to the birth rate and the result is “zero population growth” or ZPG . Figure 4-3 illustrates diminishing returns and constant returns to scale graphically. The lower curve in Figure 4-3 represents the production function in the case of a fixed quantity of 100 acres of land, the higher curve the case of 200 acres of land. There are clearly diminishing returns to labor: the production functions always slope upward, but their slopes become less steep the more labor is added to production. Average output per worker depends
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This note was uploaded on 11/29/2009 for the course ECON 423 taught by Professor Vandenberg,h during the Spring '08 term at UNL.

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Answers_to_Asst_2 - Answers - Homework Assignment #2 - ECON...

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