1. Could two economies of different sizes ever have the same exact steady-state conditions when being...

1. Could two economies of different sizes ever have the same exact steady-state conditions when
being analyzed through the Solow Growth model? Justify your answer.

2.Could two economies of different sizes ever have the same exact steady-state conditions when
being analyzed through the Solow Growth model? Justify your answer.

3. Improved technology is likely to
A) displace worker, causing high unemployment.
B) increase the marginal product of labor.
C) reduce productivity.
D) reduce wages.

4. From 1995 to 2008, the growth rate of capital per unit of labor was high, which caused
A) wages to grow faster than before.
B) labor productivity growth to be much higher than total factor productivity growth.
C) labor productivity growth the be much smaller than total factor productivity growth.
D) high inflation rates.

Solutions

Expert Solution

1 answer) The absolute convergence is not predicted by solow Growth model.If countries have same population growth rate then they will converge and have same steady state.If saving rates of two countries are different then the steady states are also different.If two economies have same steady state then conditional convergence is predicted by solow model.A poor country growth rate is faster.When countries with different steady states the initial capital stock is low and countrys growth is not high.The capital per unit of labour will converge to steady state value .It is not necessary for two countries to converge.Production techniques are used by poor country.

2nd answer is same

3 answer) A) displace worker causing high unemployment

Technical change causes loss of jobs which leads to unemployment.short term job loss is occured due to technological change.New inmprovement in technology leads to decline in number of workers leading to high unemployment

4 answer) B ) Labor productivity growth is higher than total factor productivity growth.

Growth in productivity leads o technology growth,growth in human capital and physical capital.The difference of growth rate of capital labor and growth rate of output gives total factor productivity growth.so labor productivity is higher than total factor productivity growth.

Rahul Sunny answered 2 years ago

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