MID_sample

# That is the population growth rate in country a is 3

• Notes
• 4

This preview shows page 3 - 4 out of 4 pages.

a faster rate in country A than in country B. That is, the population growth rate in country A is 3 % per year ( n A = 3%) and the population growth rate in country B is 1 % per year ( n B = 1%) (a) [4 points] Which country will have the higher level of output per worker in the steady state? Illustrate graphically (b) [3 points] What is the rate of growth of output per worker ( y = Y/L ) in country B? (c) [3 points] What is the rate of growth of output ( Y ) in country A? Case II: Growing Population and Technological Progress Consider a hypothetical economy. Suppose that marginal product of capital ( MPK ) is 5 percent per year, depreciation rate is 2 percent per year ( δ = 0 . 02), population growth rate is 1 percent per year ( n = 0 . 01), and the economy’s real GDP growth rate is 3 percent per year (d) [4 points] Let’s assume that the economy is in a steady state. Let A be the efficiency of labor or a society’s knowledge about production method. What is the rate of growth of efficiency of labor ( g )? (e) [4 points] Is the steady-state capital per worker at, below, or above the Golden Rule level of capital per worker, k g ? (4) [8 points] Money and Inflation Answer the following questions (a) [4 points] According to the Fisher equation, if the Fed announces that it will raise the money supply in the future but does not change the money supply today, then what happens to nominal interest rate? 3

Subscribe to view the full document.

(b) [4 points] Suppose velocity is constant and, in addition, the factors of production and the production function determine real GDP. If the money supply increases 8 percent and the price level increases 5 percent, then what is the change in nominal GDP and real GDP ? (5) [8 points] Unemployment Let’s assume that supply of labor is fixed in the long run, and thus the labor supply curve is vertical. Suppose that a country experiences a reduction in productivity that lowers the
You've reached the end of this preview.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern