2000 - University of Toronto Department of Economics...

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Unformatted text preview: University of Toronto Department of Economics Principles of Economics for Non-Specialists Economics 105Y [Professor M. J. Hare] 2000-2001 TEST 1: Wednesday, Navember 22, 2000 Duration: 1 V; hours W l" = Modified] 1. The tit: duration is listed for 1 V: hours. However, an extra 10 minutes is allowed for students to make their question selection. Thus, the test will last for 100 minutes from start to finish. *2. Answer any EIGHT out of TWELVE questions. All questions are weighted equally [13 marks each]. Ensure that you clearly indicate which questions you wish answered. Otherwise, the first eight questions attempted will be used to compute your grade. *3. Take a clear position on each quotation [or on each part of the quotation]; draw a clearly labeled diagram [or a set of diagrams] whenrelevant and provide a succinct explanation for your position in each question. Marks will be awarded on an evaluation basis. No marks will be given for the correct position without a complete diagmn and an explanation. Full marks will only be awarded when a satisfactory explanation is included in your answer i.e., a technically correct answer will not receive full marks. Each question carries the possibility of two bonus marks for an excellent explanation which will only be granted at the discretion of the marker. 4. Complete the lead sheet and print your name on each page in the space provided Please ensure that your correct tutorial is identified on the first page as requested. 5. All students must stop writing IMMEDIATELY when time has been called. Penalties may be imposed if this condition is violated. ALL STUDENTS WILL REMAIN SEATED AT THE END OF THE TEST UNTIL ALL PAPERS HAVE BEEN COLLECTED. 6. As annotmced, the higher of the two test grades will account for 60% of the total term grade and the lower of the two test grades will account for 40% of the total term grade. The term grade is 50% of the final grade total. 7. A 1 V: hour make-up test will be provided for students with acceptable medical support or with instructor approved personal problems. The make-up test, given after Test 2. will cover the entire year‘s work. Students. who miss Test 2 for accredited reasons, will write the same make-up test \I . MARKS 1. 1g; [4 7_ big? a. Li . . _if)_ 4- 4W 10. $5 5. . \‘3 11. :bklb 6. , y i 9’”, 12_ !_5_ Totals. 5 fiz—HZ “3,00 EC0105Y ’ _ 2 STUDENT NAME: .+ Answer EIGHT Out of TWELVE Questions All Questions Are Equally Weighted [13 marks each] Take a positron; Use a Diagram; Support Your Answer With a Solid Explanation Anthony observes that M35133 was wrong. There was little starvation during the nineteenth century In Europe even thougt the population growth rate was high The one variable input modeL which suppons Malthus’ position. indicates that there would be an absolute limil on no producttcn because of diminishing marginal productivity [retums]. Therefore. Anthony concludes that the one variable input model, which demonstrates the law of diminishing marginal productivity [whims]. must be flawed." : 5}) . 7 Position, clearly labeled diam and explanation GI: i 1“ l}. l "' '1‘ some disguised unemployed labour no 3 STUDENT NAME: ECO IOSY , - '33... )1 -Z . \"-_ ¢r\ , , , _ , , h ‘d' 'sed . -;' ( l .. '~‘ ~ ' bour-su lus counny. like India today. were to ave fitsglll‘, 2‘ 5 Brady argues that If a la W inal physical product of labouns zero]. then ' ' its a 'culnn'al sector [i.e.. the mar; . ‘ unamploymem m gn 4 m the agricultural sector to the industrial the transfer 0 . . ‘ . l .- sector would raise the average labour productivrty tn agncu ture. . . ' ~ ’ " ' l‘ositiuu, clearly labeled diagram and explanation @728 ~ 2 i 1 W Maw #12 mag/7241 WSW“ F’OMOE about» 3’” at ya MPP WWI-+16%!“ 'gjith/Ji- pmdudfcm IPMW W $41“? W #0131. more Arbour ,‘w adoladwdo Amt-fim ‘Hu; +7: graft], Magi; Producfiirt‘SMP/D (Wham +0 We. (Alum HPp=¢ Th2» 7’ W' APP .2; Cara/W 5; ”“1 #0de cam/ed 53 11a #W n M é? 64w 4; nudity/7a” gas/5T, #11 MP and harem. Tl ‘ I W 17“) {raw M PIC/€040. "MI Wag); ~ @635.“ i fflfll‘ud‘ifi:9 "in afifiwJ-A'M- Hewett" 7%“ 5/5” “7‘5"? ‘VUL mung-£2117 Sec-luv 7: gm W ”Fm“ 7714 3H” ~"fw m, 057:» . WW men» +111 0 b6 viwwzluea Meat issue . V - .th hm ELD flu Tit-6mm! . ' ' a?“ ‘ decor arm {2995735 in mew 'W ”(fir/.6111, Maw 74: {id ‘ V Wm ' 3M” Tndudtul ‘ , ‘ n we? M .74“ . t J 15% at: 5506—57,; - ‘ 9% MM fill." a, / ,J 7W (an M more 020 Ma, filoda‘flur‘z‘ .56, ’ seclw. 1W .ullur («ma sin-‘5: bk “fed (74' Tami: a Hilliard E pioth-fiu'rtb 1m (wow ~swf/«o (W 3' a4 Trim “3" v 9M]: (3 @ ECOIOSY ‘ _ 4 STUDENTNAME:_ fl “Colleen finds the following Solovi-rype data for a hypothetical economy: the rates for output l labour and capital are 8%, 4% and 6%. The weights allocated to labour and capital are: 60% and 40% respectively, Colleen reviews this data and finds that Solow’s residual [i.e., total factor productivity] is a more important contributor to the rate of growth of output than either the connibution~of labour or the contribution of capital. In addition, Colleen concludes that ‘total factor productivity' represents 80% of the increase in labour producrivity in this hypothetical economy." Position. computations. reasoning and explarfi'un [No diagram] _ | A A " " ‘gmam’ Y=9<L~FT<TTW We :W'fida CM, /\ °<=6o7° .147, Y=37¢ ,6: 40?. g2=57a _ 870 = (0.6)(47Jf’6ifléi) *TFP TF/lp = 3.077;; , V ———-___._-—-—-‘ N2: 2147/ f/BLW/ \K 7%ng n T/w M fla/MWL-xn\‘ 4 --- \ 7hr?) Jo mam ‘Hlan +41 (WIZJIM a; hay, ”(hid ’fid‘” WWW Im Show WP may Manx? +4» 7mm 5” “d WWW 0 l. Lu :2. ”We iuafi . _ . ‘ 'W ”U eranasww m WM. MW m, f "“1 ”W’MV’W W22 5% 7 0%- T/m ‘ ' W :3 /aévu/~ )produzfiW/‘g s N/uflmi'b A j +1111 14;an (.1, r [A L _ _ : 87° _4_.7O// . =59. / ‘3‘“!!- M 7/:p :“ M " l 3 302 z (ow/775%- illm: ’ :7 7"” can *WW A" WWW“ “- 15:. _ ”197° 2 (11) 1‘7» :1 a8. 6 t! 7”) WM 08 - r 4;” 4/64 7~ - m— 8021 \ “Wu /aému~ , Twunifmfi'.” 0‘13“” flu ngm was. imam; r... . a“ 1’31. WW WU Mada/mm, Ir ,.;., ... ECOIOSY . s STUDENTNAME:_ ____ ECOlOSY _ 6 STUDENTNAME: / “Dillon reviews the analysis on increases in labour productivity between l958 and 1932 in Canada - as shown in the Economic Council of Canada report. The report identifies three reasons for increased labour productivity in Canada during this period: higer capitaVlaboq‘ratigs. higher total factor productivity and i _ ___ ”e in__l_abour. Dillon understands the first 576353531 factors but is perplexed b the ' ’ tr rationale: inter-industry labour shifls. Dillon asks how can this be an explanatory variable if abourjust‘moves from one indusrry to another?“ “Egan reviews the Denison analysis of the sources of economic growth for Japan. Egan observes that the contribution of education is a significant source of economi’c ztowth as measured in the eontnbutmgan's friend, offers an explanation. Faith suggests that Egan consider two $93959! labour inan industry: Wiggins SZOngLegyear for 200 erson hours and Group H L ur whighfiglsggnggpfleflgrggw person ho _s. ‘Group 11 workers have EEVmfiTEVFfl‘, years of e cation. In Year 1 in the industry. there Position, example and ex lanation [No diagram! show your computations] #0», m‘ _ ‘W ‘ . _ ,_ werelOO employees in GER] and mployees in group $1.011: year later. when the wage vi . ‘ ., ._r ‘ m UN" 6 U. LL: r- Jill “I mes have not changed. the industry Bifi has lOO employees in GrouE I: however. the number of i.._.‘.l,.|r.r.-A‘- 5, I: l .. ~ u * - workers in 99339-11 has risen to 500 employees. Faith concludes that a weighted person hour series [using the wage rate for Group I labour as a reference base] would grow more quickly than anon-weighted person hour series. Thus. Faith concludes that the contribution of labor; is .9292! when the qu'al’igLfla—ctor is indufieijllfilzflflélfil}; Faith also c‘fli‘flf‘fiifilflfilfiijmfiased I Mn oflabourw ks—to—deL-Wfl'sfiiig‘ilzn . kfi Position, computations and explanatim (No diagram: show your ark] # unite om lirs ) . . Hale? Gm? 1 1W at 90 000/ "m r 7’. wtgp _J "a ' 7"" @000 [00 3" '1”; 67 1 in” , , City: W ' ”"70 15 33,500 6” .2000 500 ’ or JL 0 Nd .~flclud9& WW ‘,- l , . gig/$1 ” ‘ Jig Non—WWW hour = (/oo>tm)+(eoo)(&om> 6W 1) = 800 000 2% hr: (“6” 6"” I) = (/00)(t9000)¢(500)(10003 :k W ' a 4&1; _ 1,300,000 / wen/1 - 890,000 = L50 0% T/u l-MCNMJ- W PW”- how ‘ ‘ A, , an 307“ m M “@6- (mremfiflflme'fh 9W1 a” “few Amy; M ’3 . “73M”: awn ow =(Ioo)tamo) +(é— Q00 (3 i W V (1% 5W1) 9“ D) m) limmédn‘lew— ijfivémru : [,100 000 on Ar. (4” W1) = (/00 )uooo) 1% )(Jonoxavo) I :JJ%% 1 2 ~ - j ‘ 0 Mi. : 1,700, coo / I] be” I /, loo, 000 0: T/u Woman ‘ ~ . ' MW “av/29.210» W.“ frfioufiéh/ygmvjo mam: ragga-450,, 54mm no W 4;“ Wanna A: “3“” ~12 % alt-t MW , . ‘4 3 W14). coma—no )4}: W 7 “k [@139sz it; laéaur- HAN—film 711» W J» Ouafiifjmgr 1.411th W_ ‘fluz 570“)“ng JZ. flu «womanhtgtfiw Pad “El/D: = {-56 ECO 1051/ 7 STUDENT NA_-\1E;_ ., l . . . , . g J1”, a?:;lfi:;:|vfeorlyflc;nf:::.ml;ealy reads 1:1 a Very recent text [Todaro '5 Economic Development] Lhal ‘ _ - e rates. in 997. Japan had a standard of [Mn ' 1’ . , $8.930 [SUS] against the U3. level of nearly $29,000 [SUS]. Irish reads ingtiiiesr “PM GDP] of 1'4 ran 5 GDP/caplta was 54.720 in I997 usin t u d am: Volumcutal power- parity method Brazil GDP/capita w .l n 31' lhfipurchasmg Healy and lush. claims the purchasing-pow 35°". a 5161"! of [mm 6. g official exchange rates: bu as computed at $6.240 U.S. er«parity method is best.“ Position, reasoning and explanation [No diagram} -€ _ . We ”Md and W ”Md/“34k! A; 1D? /(‘$p7fltg a". ngn. ow mu; 4° fill [”34", Wx‘rjfi 5"" (3M0 M m 3N J’W dW51‘Y'Cl MW. ‘f/mx W 7‘0I‘41 .72”. ‘ a» W 60 _ :3 W m3). GDP does .3 P 9“ WWW .7, €xd\ 06:? '_ fold” — ‘ I» mar-(had W m 44’ 2' (“/51 ’C‘k-L (“m/C (1 l 64rd? 2mm CW ‘t 9‘ A _ * ‘5 W flux dze difhrfeof 53' d . fl 770i 0’“ ewes; 7m7t~ar>b , mud- 7:2; in ‘2’ [mflf’h’fimfl N%M.TUO Pam 'flq W ~ Ml , 6/ Nflpd (2/) “”3 (PM W227 7 ‘3’ d’rgéwt - W ) ' - ‘50?th ‘hfldll,’ ICSl’rHed ““4 aw m n .. 74' w m \- ——\ . 1‘1“ ECOIOSY s STUDENTNAME: '. ‘. ‘ 1. 'Kelly takes the position that Malunu was incorrect, There was little )unaliun experienced during the nineteenth :enlury in Europe :Ven though the population growth rate was very high. Therefore. Kelly mmJudes that the model assoe‘med with diminishinl marginal producuV'ny [rentmsl mun also be seriously flawed. Kelly contends that Malthus was man; and that the model was wrong. However. Cindy. I friend of Kelly. observes that die Malmusian problem has seriously resurfaced in recent Gandhi and notes dial 2 billion population in the world currently make less than 32 US. per day. Suryation is a stinus concern today in a number ntcountriet. Therefore. Cindy concludes lhil even if the model is wrong. Maltnus. in live long run. was eorreex.‘ A " ' ~~ . , V l a r, ,3 , Jurérrry.» 1" - ~, igulfi “”5 | Yo, . _ y) . \ ii. ,1" e... i. ”7160 ll I?” V4.7,1l/ pm, ,/ """WD‘ '~ . Jr "”" t _ '.. ‘-.!I . J L’ (i... t 'r (”gr/i“? hi? 5 “ft 451'“. - . Free-”14$ r It" ' ‘ . fl - ' P ' ’ m“ ’ 1r.“);i'\>l Wh as a this Wron elative to the l etecnth Ceu . stantially In the nineteenth century ) there was, as predicted. a population explosion. As a result, the price of grains rose sub ' d. in Europe. However, the great fears ofMalthus were not experience ' . 7 Was the model which led to diminishing marginal productivity flawed? Was Malthus wrong tn his concerns. The answer to each question is NO and N0. . Two connected events happened to feed the population in Europe in the nineteenth century: the innovation of theflilways and.thefl development of new grananes inwestem United States,_we§tqm Canadahandjn _ _entina. ltustralia and the Raw-«gun..- xEXO changed indie model. as the innovation of railway: occurred which greatly cheapened the costs of transportation. “Ma”, -- -» With transportation costs reduced, farmers in the above cormtries produced grains on newly developed arahle land which W.”— ~ ‘were pmfilably «ported to Europe. Thus, the quantity ofland available [To] also increased. Initially, To was the granary of Empe. Afier the introduction of the railways, To was greatly increased. to include the granaries of the specified regions. Thus, Malthus was correct and the model was correct. Innovation modified the model [really created a new model] and To was able to be expanded as a result of the innovation. Thus a new model was formed. M -.. ._,__ ECO lOSY . 9 STUDENT NAMEf _ _ _ 8. Logan questions Krugman’s conclusion that the only way in which GDP/capim [consumption pher cahplta] can increase in the long run is through increases in labour productivity Logan suggests I an ere are many other ways in which consum ' ' ‘ I ' ‘ ptlon er ea Ila could mt: e ' ’ ‘ country}, ‘ p p r as: in an industrial Position, reasoning and explanation [No diagram] [W P/dtucffv'éc‘y :4 +41 ca? Nikos! 7’s THC/PW Iv}! ‘ ., to Macaw PMWM by mural/.3 )‘lw anal/00L 52150 - ‘ (6)07!“ \ cm slam WM, (6:: m M13 mod , n; W EWM For m / Can owbd Rack, 75, Q”: 9%, /0 ”an: 0.14 Ecmm can“ _ emf/W S7 ' 71!” All mam“ ‘9me 7‘, also 7,, . Circa/‘3 80mm Walter“ P“ M A1 flemLC‘in“;l Loustm. HW 554, 711cmdéanw:ai 2 em» ‘ - ' unfit; AIM “£27 My . , {113A 71», W a’m -; 'mmm - . W ,M mi» #07 Jon/t cud (IV/“Zen; sat/La n U "’MSMp/iaw by deaf ‘10 [M 5157 j" , wwwflfiéflmfiwafw STUDENT NAME: taco 105v . 10 fl. 3 “Nolan rwiews the economic slowdown since I973. as reported by many of the readings including Krugman and Van Duijnr Nolan has the answer for the disappearance ofKnIgman’s ‘magic‘. J Nolan concludes that the economic slowdown in 1973 was simply caused by OPEC's 1973 increase in petroleum export prices." Position. reasoning and explanation "I711 Canamio $0de wan not 5&(68 rowed {7 510563 H75 Tncreau 3" Penn/Bum “Pane W'aHfiwgfix H had (06mm 4141. {Lemmy flail; 5M [Q75 M madlwld PAH/“964% 96mg. ‘2’ 4““ Ail /%O‘s, a. s/mdom 5‘ [awkwmzy 6M0 alreadsj I :0" M _ OLMIC/ ‘I 5W ‘M J W mam- ofwl {Wu} 5{ 'Fodunzw ’ - ”753mm! 1 05 M Cwuda. A gbwdau—v‘ {‘9 W A Mafia e14“ rma ‘ 7’“ (comm 570M [’2’ COM 1am I ‘8 ”A W“. “flu Producfinij slowdcm, 4 — “famok by 1/11 [ac/c % 7,,mem 5;da::$_l M 077M W 58‘ flu 9‘ «W M k '23?“ 6" new carried ”0741, 4 firm A?“ ’H‘L at!» Ego-m fi WM' ’4‘” - m mum will i 1 i ‘1 I I m +1st u “i were mod/‘3 - - int/ELM j“ fiéo 7""Werf‘eM ”“17 Wang-1U ‘lo cm 7‘1 / d 5/ (74144;: e W - a \ “HM ‘ bib /9é0.(5 0-150 7". ‘1- W #5 ‘ <6 Producmi-fy_ £9641 . 190:0" /Aa>6w( 7‘0 W #5; 211% 0mm 42 recesshn Maw oh $0 "Nfif‘ww ‘4’“ 7“ ch; -- +7,“— F as 5W 09 hi . WW 6)“ ”"6679 imam/3.4 4 “ W MC; ‘. 0h W [€9ng an!" vim/raw “:1“? MKM an: L 112%, ”(M m M 07575 ,AW d-d my Enéaéfm‘“ I I M 6/02.: chum I‘D‘b. 7n flu Shadowy; SIM: m _ 9} 0m m (ac, \ 00 $1140 7h, TnCIEm you. \ :5 flum 0w»: M ’ W W 14% _ ECO lOSY ll STUDENT NAME: ')__ . __ l “Olivier looks {It the labour productivities for rwo countrieS: Brazil and India. Both COunlneS 'Ih labour athe single factor of production. In /il:- manufacture on] bicycles and sweaters WI 100 units of lahoRcould either Produmwm In India} 109____ units of abour MESi’Ild eI er pro ucll Maggi-e312 sweaters Olivier eoricludés that, since India has a lower labour ‘ productivity in each product. India Is not intemarionally competitive. Thus. lndia could noI achieve any gains from international trade and Iherefore the standard of living in India musl decline." Position, table, diagram and explanation 1 12 STUDENT NAME: _ _ ECO IOSY Lt/“Patrick assumes that Krugman‘s ‘magic‘ [increased labour roduct'v“ AustralIa. Currently, Australia produces only wine and shoes witlijthe fagtcifiiib‘ovli):hlnitc‘nlln. i0 Australia, 200 units of labour could produce either 25 battles of wine or l00 airs Ila h) m Initially, In Italy, 200 units of labour could produce either 100 bottles of wine gr 20: 5 Des shoes. However, innovation has remrned to Australia [but not to Italy] With the renuiiail'stli'r ‘magic' to Australia, 200 units of labour can now produce either 50 bottles of wme or 400D e of shoes Patrick. who lives In Australia is ecstatic. Patrick concludes that once the mill: returned, Australia could now achieve gains from inIemational trade" Position, table, diagram and explanation — 'Dvun} FTC L)..I/"r‘/("/L’ I I. ,. ”L- “-1 . - =L 9 >0 ~~ * I I'll“) DA? Ti rHrHLV F0: in“ 53 .’ . Llit'lvn-g'r y";l'll“‘li ..I‘\. l\)lr~ — * ””l i i c . so la? (”ii' now: mil o»:- i") '1 ‘, h \ (“r 5 i I M.) (‘5 T: i I -' a lo‘ \/ Yl [ ECO lOSY 13 STUDENT NAME: .1 ._._ ‘Assume that Mexican wages are about 20% of the level ofCanadian wages and that Mexican labour roduc vity is also a III 20% ofihe level a .dianlaherdupIiyijy. Seeing— who' IS / a anadian labour leader. argues that as a result of the strong wage differential new Canadian investment would go to Mexico and, as a result. many high paying Canadianjobs would be losI." PosiIinn, reasoning and explanation [Show vour work] $53M COMO-*6" 030%” JD #SIWMJ [mm [W prom saw a; Wax ,w law. 74» 6/6513 m an In Mama.- ' [ABE (t4 flu“) @07155101 hour M «W? [7de 5 / if} . - o = ‘ 907.15 2 I /’ =fi/ ‘mmwmv‘l‘? aéMpMzCofl/ww 12:; -Hu Saw 7‘,” Aaflt cm 1A4 M “03% cod-9. aim. +0 {mar gun/7b -‘*’*"f‘fm€ lever P/mcfima. WM W “‘7’ 5< los+ 4/54, ) ..... .. - fo‘zca 90% {5 = l 0? Gui/ad («Dual-cl 52% [W 6" /m and (W “at Nam fay-Ii) [£11462de Joe‘s. 9&7} nal flgk [/1146 {ac/m— 7nl/f‘57"_ 74L M dbmasfl a] , I C nan/«e1 “CG-11% a6. Arbourle'hv 7W / f‘LL mm OLGA/{57054 (Cm-lav 0w LCH . “3 law affog-y- “(“5014ka we! mm [Tim—all awn/Mi ,uI. {Wm music-r 1o 7nvts‘f 7n (70441112911. milky Man M3550 (14.4 Grew who \JJ’IU in {momma 7%, I do "at (18,“ LJHL'I :W‘o’n [055 5g J94» «(w [Maw 01w 4a m ' v Wan?» (3)2} 13 a ...
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