Consider the following data for a hypothetical economy. All payments to labor are two third of total
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Question:
Consider the following data for a hypothetical economy. All payments to labor are two third of total GDP. From 1960 to 2019, the capital-output ratio has remained constant at3.
All values are continuously compounded, annualized growth rates, in percent.
Growth in Capital per worker (1960-2019): 2
Growth in Total Output (1960-2019): 6
Discuss whether this economy is on a Balanced Growth Path.Compute your best estimate for thegrowth rate of the labor force.
Describe one policy that can increase the standards of living of workers in this economy. Make sure that you carefully explain the policy and how it impact the standards of livings.
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