Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: daixieit

PROBLEM SET 1

ECON UN3213

Problem 1

2.   For the countries that have data for 1960, compute the average ANNUAL growth rate of per capita GDP between 1960 and 2021.

(a) What 5 countries have grown the MOST over this period? What are their growth rates?

(b) What 5 countries have grown the LEAST over this period? What are their growth rates?

3. Go to the internet and find a blank POLITICAL map of the world.

4. Paint in RED all countries with a 2021 GDP per capita of MORE than 5,000 dollars.

5. Paint in BLUE all countries with a 2021 GDP per capita of LESS than 5,000 dollars.

Hang the map on your wall. Lay down in bed and look at the map while think about WHY some countries are rich and some countries are poor.

6. Write down some of your thoughts about WHY some countries are rich and some countries are poor.

2  Problem 2

1.   In your own words, define the concept of poverty (no need to go to a book or encyclopedia).

2.   How are economic growth and poverty rates related?

3.   How are economic growth and inequality rates related?

4.   Will a growing economy ALWAYS undergo a decrease in income inequality?

3 Problem 3

1.   Define the concept of constant returns to scale.

2.   Why does it make economic sense to assume that the production function exhibits constant returns to scale. Why does it make economic sense to assume that the production function  exhibits positive returns to capital?

3.   Define the concept of diminishing marginal returns to labor. Why does it make economic    sense to assume that the production function exhibits diminishing marginal returns to labor?

Problem 4

Consider the following production functions:

1. Y = AK1/3L2/3

2. Y = A(K +L)

3. Y = (AL)1/4K1/4

4. Y = AHL1/2

For each of the production functions listed above:

a.   Determine whether the production function exhibits CRS, diminishing returns to physical capital (or human capital, when applicable), and diminishing returns to labor.

b.   Check whether each production function satisfies the Inada conditions.

c.   Compute the per capita production function.

5 Problem 5

Consider the Solow-Swan model of growth. Imagine that the production function is Y = AKa L1−a

1.   Use the production function to compute output per capita, y = Y/L, as a function of capital per person, k = K/L, A and a .

2.   Derive the fundamental equation of the Solow-Swan model. Please show all the steps.

Furthermore, imagine that the savings, depreciation, and population growth rates take the values s = 0.4, 6 = 0.1 and n = 0.05. You do not know the value of A or a .

3.   Use the fundamental equation of the Solow-Swan model to compute the growth rate of capital per person as a function of k, A and a .

4.   In the steady state, the growth rate of capital is zero. Using the parameters assumed above, find the steady-state level of capital per person, k* as a function of A and a .

5.   Calculate GDP per capita at the steady state, as a function of A and a .

6.   Imagine that this country is in its steady state, so its capital stock is k*. Imagine that the        country gives away one unit of capital to the world bank (i.e., the capital stock is now           suddenly k*- 1). What is happening immediately to the growth rate after the donation? Why? What will the capital stock be in the long run? Explain.