{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Answers_to_Asst_2

Answers_to_Asst_2 - Answers Homework Assignment#2 ECON...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
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 on the ratio of output to labor. In Figure 4-3, output per worker is represented by the slope of the dashed lines that connect the origin
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}