final - Economic Growth and Development Professor Olivier...

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Economic Growth and Development Professor Olivier de La Grandville Fall 2008 Final Exam Released October 24 th , 2008 - Return November 10 th , 2008 Please sign the honor code and use blue book(s) for your answers. To be remitted to Jihee’s office (Terman 490) not later than noon on Monday, November 10 th ,2008. 1. (40 points) Suppose that you observe a linear relationship between the wage rate w and income per person y . Determine the production function implied by this relationship. (Hint: The rela- tionship y = aw leads to a differential equation whose solution is production per person.) 2. (60 points) In the Solow model of economic growth, you have noticed that if the equilibrium capital-labor ratio r * was uniquely determined, you could also determine the equilibrium value of income per head y * and consumption per head c * (remember that consumption per head is just the difference between income per head and investment per head). Notice now that, for any given production function, the level of
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