2nd prelim of Econ 3140 Spring 2009

# 2nd prelim of Econ 3140 Spring 2009 - Economics 3140-1...

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Economics 3140-1 Second Prelim 03252009 Please Choose Five Problems (If more than 5 are answered, only the first 5 will be graded) 1. Consider an economy with an aggregate production function: Y = A K 1/2 N 1/2, , Depreciation is ten percent, population growth is zero and workers save ¼ of output. Productivity is constant and equal to one. (a) What is the steady state value of per capita output? (b) What is the steady state value of per capita consumption? (c) What is the steady state growth rate of per capita output? (d) What is the Golden Rule capital stock? (e) If A increases by 2% each year, what is the growth rate of steady state output per worker? (f) If A increases by 2% each year, what is the growth rate of the steady state capital per worker? 2. Let’s assume that the short run level of output and real interest rate are determined by G and T, so in the short run, the intersection of the IS and LM curves needn’t be at full employment output. Let’s be Keynesians and treat P as fixed, which gives us two equations and two unknowns (Y and r).

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