PSLecture6 - Problem Set of Lecture 6 Sources of Economic...

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Problem Set of Lecture 6: Sources of Economic Growth and Productivity Increases, With Emphasis on Technological Change [October 20, 2009] Note: Questions identified with a T are available for tutorial discussion and are possible test questions. Assume that the following Solow-type results accrue to a hypothetical economy: the growth rate for output, labour and capital are 9%, 3% and 6%; the weights assigned to labour and capital are 2/3 [or 66 2/3%] and 1/3 [or 33 1/3%] respectively. Questions 6.1 to 6.3 are based upon these results. T6.1 “Greta reviews the preceding results and concludes that the biggest contributor to economic growth in this hypothetical economy would be Solow’s residual: total factor productivity. Total factor productivity would be in excess of twice the contribution to growth when compared to the contribution of labour or to the contribution of capital, taken separately.” T6.2 “Graham reviews the preceding data in the hypothetical economy above. Graham is aware that the rate of population growth in industrial countries has been falling. As a result, Graham suggests that if the labour force growth rate fell from 3% to 1%, there would be a reduction in the growth of real output by 2 percentage points. However, Grover argues that Graham’s calculation is flawed. In Grover’s opinion, such a rate of reduction in the growth of the labour force would not have a large impact on the rate of growth of real output for the hypothetical country above.” T6.3 “Geraldine has been examining the rate of growth of the labour force in person hours in this hypothetical economy. Geraldine has found that when a quality adjustment has been added to the growth of the labour force, the initial 3% rate [above] has been increased to 4.5%.
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This note was uploaded on 12/22/2010 for the course ECO ECO105 taught by Professor Hare during the Spring '08 term at University of Toronto.

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PSLecture6 - Problem Set of Lecture 6 Sources of Economic...

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