1. The following table shows the data for Canadas aggregate production function with constant return to scale and the output elasticity with respect to capital equal to 0.3.

Year	GDP (billions of 2002 dollars)	Capital Stock (billions of 2002 dollars)	Employment (millions)
1961	264.5	525.6	6.06
1971	437.7	824.7	8.08
1981	647.3	1277.4	11.31
1991	808.1	1715.1	12.86
2001	1120.1	2071.1	14.94
2010	1325	2668.7	17.04

a). Find the values of total factor productivity for the given years above.

b). Complete the following table by calculating the average annual growth rates (%) for GDP, capital stock, employment, and total factor productivity. While it is not necessary to show all your calculations, show the formulae you use, and also explain and illustrate how you obtain your answers.

Year	GDP	Capital Stock	Employment	TFP
1961-1971
1971-1981
1981-1991
1991-2001
2001-2010

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c). Can you find in your above table a stylized fact, if any, that is also observed in other industrial countries during 1971-81? Relative to the other periods in the table, did output grow at reasonably high rate during this period? If so, what was the driving force?

d). Did output during 1991-2001 grow faster than the previous decade? What was the driving force behind the growth during this period?

e). Which decade has the lowest output growth? Explain concisely.

2. The output of an economy is characterized by a Cobb-Douglas production function with constant return to scale and an output elasticity with respect to capital equal to 0.3. Also given are the following parameters: 30% saving rate, 5% depreciation rate, 2% population growth rate, and the technology factor is 2.

a). Find the capital-labour ratio, and also the output, consumption and investment on a per capita basis in the steady state equilibrium.

b). Is a government policy that raises the saving rate to 40% socially desirable? Explain your answer with reference to a comparison of this new steady state equilibrium and the initial steady state equilibrium in a) above.

c). If the initial capital-labour ratio is 30, is the economy operating efficiently in the sense that welfare cannot be improved? Explain concisely. What if the initial capital-labour ratio is 15? Again explain concisely.