ECO 201: MACROECONOMICS II

TUTORIAL 3

Multiple Choice

1.The relationship between the output produced in an economy, the input of factors of production, and the state of technological knowledge is called the:

A) Aggregate supply function

B) Aggregate production function

C) Aggregate investment function

D) Marginal product of labour

E) Marginal product of capital

2.Growth accounting explains:

A) How economic decisions control the accumulation of capital

B) How the current savings rate affects the stock of capital in the future

C) What part of growth in total output is due to growth in different factors of production.

D) All of the above

E) Only A) and B)

3.If the economy is in a steady state then:

A) The capital-labour ratio grows at a constant rate

B) Output per capita grows at a constant rate

C) Output, capital and labour all grow at the same rate

D) The savings rate has to be equal to the depreciation rate

E) Only A) and B)

4.Assume a production function with constant returns to scale. The share of capital in production is 0.25 and the share of labour is 0.75. If both labour and capital grow at 1.6% and the rate of technological progress is 1.2%, what is the rate of growth of real output?

A) 1.2%

B) 1.6%

C) 2.8%

D) 3.2%

E) 4.8%

5.In the neoclassical growth model, the steady-state capital-labour ratio is determined by which of the following equations?

A) k = (n + d)y

B) k = sy(n + d)

C) k = sy/(n + d)

D) k = y/(n - d)

E) k = (n + d)/sy

CONCEPTUAL

1.Elaborate on Robert Solow's empirical estimate of growth.

2.Contrast neoclassical growth theory to Solow's ideology.

TECHNICAL QUESTIONS

Question 1

Consider the following production function: where both the population and the pool of labor are growing at a rate, the capital stock is depreciating at a rate and A is normalized to 1.

a.What are capital and labor's share of income?

b.What is the form of the production function?

c.Find the steady state values of k and y when s = 0.20.