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practicemidterm - EC307 Sample Midterm Winter 2011 1 The...

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EC307 - Sample Midterm - Winter 2011 1. The World Bank reports Canadian income per capita, adjusted for purchasing power parity and measured in 2005 dollars, as the following: Country Year GDP per capita Canada 2000 $31,741 Canada 2009 $34,567 Cote D’Ivoire 2000 $1,737 Cote D’Ivoire 2009 $1,547 (a) (5) Calculate the growth rates for Canada and Cote D’Ivoire over this time period. (b) (5) Define “conditional convergence”. Are the results consistent with the idea of conditional convergence? Explain. 2. The basic Solow model, with population growth, but no technological change or human capital is based on two equations. A production function that defines income (y) as a function of productivity (A) and physical capital per worker (k): y = Ak α and a capital accumulation equation: Δ k = sy - ( d + n ) k (a) (5) Assuming that capital is paid it’s marginal product, show algebrically what share of income accrues to capital in this model? (b) (5) Calculate the steady-state level of capital and income. How does population growth affect steady-state levels of capital and income? Show algebraically and
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