# ProblemSet-2-Summer2020 (1).pdf - Econ 100B Economic...

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Econ 100B: Economic Analysis – Macroeconomics Problem Set #2 Due Date: July 10, 2020 General Instructions: Please upload a PDF of your problem set to Gradescope by 11:59 pm. Late homework will not be accepted . Please put your name and student ID at the upper right corner of the front page. 1. Write out the steps need to show that the last equation on slide 21 of lecture 5 follows from the first equation on the same slide. Hint 1: A review of the first 2 pages of the memo 1 has some helpful hints. Hint 2: the expression for κ can be written as K = κEL . 2. The variable κ is capital per worker per unit of worker efficiency, or capital per worker modified to reflect the difference in efficiency among workers. Consider two countries, A and B, with labor efficiencies E A = 1 and E B = 2, respectively. (a) If the size of the labor force is the same in each country and κ * is the same in each country, which country will have a larger aggregate capital K in steady state? (b) Given your answer to question 2a above, briefly explain why κ provide a better measure of the capital per worker needed in an economy. 3. By how much does the half-life shown on slide 10 of lecture 6 change if g E doubles? 4. Briefly explain the reason each of the bullet points below for the shock in the saving rate shown on slide 12 of lecture 6. At t = 0: s up, so κ * up. κ ( t ) unchanged (unch). Negative gap created. t 1 / 2 unch. Balanced growth up.