Question

This problem asks you to do your own growth accounting exercise. Using data since 1960, make a table of annual growth rates of real GDP, the capital stock (private fixed assets from the Fixed Assets section of the BEA website, www.bea.gov, Table 6.2), and civilian employment. Assuming a_K = 0.3 and a_N = 0.7, find the productivity growth rate for each year.

a. Graph the contributions to overall economic growth of capital growth, labor growth, and productivity growth for the period since 1960.   Contrast the behavior of each of these variables in the post–1973 period to their behavior in the earlier period.

b. Compare the post–1973 behavior of productivity growth with the graph of the relative price of energy, shown in Fig. 3.11 of the textbook. To what extent do you think the productivity slowdown can be blamed on higher energy prices?

Answer 1

a)

It refers to the market value of all final goods and services produced in a country in a given period. GDP per capita (GDP per citizen) is often considered an indicator of a country's standard of living.

Here we publish the nominal GDP, also called GDP at current prices, not adjusted for inflation.

Its formula is:

GDP = C + I + G + X-M

where:

C = Consumption I = Investment, G = government expenditure, X = Exports, M = imports

The growth rate of gross domestic product is the change experimenting by GDP (gross domestic product) over a period of time. The real economic growth rate is calculated used real GDP (at constant prices), adjusted for inflation.

b) The productivity perormance in ore liberalisation (1973-1991) and post liberalisation period(1992-2005).Using the growth accounting approach it has used to derive the total factor productivity growth which shows about the changes in the output that are not attributable to the changes in the input of the particular comoddity.It includes the effect of technical change and economies of scale,capacity utlisation ,market efficiencty,qualitative changes in inputs and its inefficiency.The non input factors make the input factor more productive which enables more production with same quantity of inputs.