b. If instead its population grows at 3% per year and its output grows at 2% per year, calculate its rate of growth of per capita output. 4. The rate of economic growth per capita in France from 1996 to 2000 was 1.9% per year, while in Korea over the same period it was 4.2%. Per capita real GDP was $28,900 in France in 2003, and $12,700 in Korea. Assume the growth rates for each country remain the same. 282 • PRINCIPLES OF MACROECONOMICS
a. Compute the doubling time for France’s per capita real GDP. b. Compute the doubling time for Korea’s per capita real GDP. c. What will France’s per capita real GDP be in 2045? d. What will Korea’s per capita real GDP be in 2045? 5. Suppose real GDPs in country A and country B are identical at $10 trillion dollars in 2005. Suppose country A’s economic growth rate is 2% and country B’s is 4% and both growth rates remain constant over time. a. On a graph, show country A’s potential output until 2025. b. On the same graph, show country B’s potential output. c. Calculate the percentage difference in their levels of potential output in 2025. Suppose country A’s population grows 1% per year and country B’s population grows 3% per year. a. On a graph, show country A’s potential output per capita in 2025. b. On the same graph, show country B’s potential output per capita in 2025. c. Calculate the percentage difference in their levels of potential output per capita in 2025. 6. Two countries, A and B, have identical levels of real GDP per capita. In Country A, an increase in the capital stock increases the potential output by 10%. Country B also experiences a 10% increase in its potential output, but this increase is the result of an increase in its labor force. Using aggregate production functions and labor-market analyses for the two countries, illustrate and explain how these events are likely to affect living standards in the two economies. 7. Suppose the information below characterizes an economy: Employment (in millions) Real GDP (in billions) 1 200 2 700 3 1,100 4 1,400 5 1,650 6 1,850 7 2,000 8 2,100 9 2,170 10 2,200 a. Construct the aggregate production function for this economy. 8.4 REVIEW AND PRACTICE • 283
b. What kind of returns does this economy experience? How do you know? c. Assuming that total available employment is 7 million, draw the economy’s long-run aggregate supply curve. Suppose that improvement in technology means that real GDP at each level of employment rises by $200 billion. a. Construct the new aggregate production function for this economy. b. Construct the new long-run aggregate supply curve for the economy. 8. In Table 8.1 “Growing Disparities in Rates of Economic Growth” , we can see that Japan’s growth rate of per capita real GDP fell from 3.3% per year in the 1980s to 1.4% per year in the 1990s. a. Compare the percent increase in its per capita real GDP over the 20-year period to what it would have been if it had maintained the 3.3% per capita growth rate of the 1980s.
- Summer '18