Questions are based on Weeks 1&2 lecture contents but are designed to deepen our conceptual understandings. Students are strongly advised to discuss these questions with their group members in their  designated tutorial classes. Questions  marked  * are  designed for student  (or group)  led discussion.

*1. Use the neoclassical (Solow-Swan) growth model to analyse the policy of birth control in the steady state equilibrium. Is the model prediction borne out by the fact or data?

*2. East Asian economies had high saving rates. What would be the short run and long run effects of this policy? Use the neoclassical growth model to discuss the effects on long term economic growth.

*3. ‘The rule of 70’ states that if a variable ‘X’ grows continuously at g% a year, then it will take         approximately 70/g years for the variable to double.  The rule is derived from the following formula for exponential growth, where Xt  is the initial value of variable X in time t and Xt+n  is the value of the variable in n years.

Xt+n  = Xt expg ⋅n

Let’s do some data exercises. Click on the link:https://fred.stlouisfed.org/series/KORRGDPCshowing real GDP per capita for South Korea. Obtain real GDP per capita numbers in 1962 (Park Chung-hee     era started) and 2011. Also, click on the link:https://fred.stlouisfed.org/series/NYGDPPCAPKDCHN    for China, and obtain real GDP per capita data in 1978 (Deng Xiaoping era began) and 2020.

a.    Using the above formula or the rule of 70, calculate the average annual growth rate (g) for the two countries over the respective periods. How often did each country double its living standards as measured by per capita real GDP?

b.   Assume that these two economies instead grew at the rate of Australian growth of 1.6% over the respective periods. What would the real GDP per capita have been at the end of

2011 and 2020, respectively, for South Korea and China?

4. The Gini index or coefficient is a measure of income distribution, originally used by the World Bank, and is used widely for measuring a country’s degree of income distribution. (See                 https://en.wikipedia.org/wiki/Gini_coefficient)

Consider the following chart.