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
capitallabor 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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This note was uploaded on 06/16/2010 for the course MS&E 249 taught by Professor Olivierdelagrandville during the Fall '08 term at Stanford.
 Fall '08
 OLIVIERDELAGRANDVILLE

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