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ECON202midterm1_f07 - ECON 202 FALL 2007 Malhar Nabar...

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ECON 202, FALL 2007 Malhar Nabar October 4, 2007 MID TERM I Instructions. The maximum score is 75. Please answer all FOUR questions. Show all your work. Simply writing down an answer (even if it happens to be the correct one) without an adequate demonstration of how you arrived at your answer will not get you full credit. Partial credit will be awarded for incorrect answers where adequate reasoning is demonstrated. You may use a scienti°c calculator. GOOD LUCK! 1. (Ten Points) Growth Accounting in the Solow Model An economy described by the Solow Model has the following production function Y = K 1 = 3 ( eL ) 2 = 3 ; where Y is aggregate output, K is aggregate capital, L is aggregate labor, and e is an index of technology. The economy is in a steady state with the labor force growing at 1.2% per year and technology growing at 1.8% per year. What fraction of the growth in total output is accounted for by technological progress? 2. (Twenty Points) Solow Model with technological progress and population growth
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