Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Expenditure-side real GDP at chained PPPs (in mil. 2017US$) denoted by rgdpe. Number of persons engaged (in millions) denoted by emp. Average annual hours worked

image text in transcribedimage text in transcribedimage text in transcribedimage text in transcribed
"Expenditure-side real GDP at chained PPPs (in mil. 2017US$)" denoted by rgdpe. "Number of persons engaged (in millions)" denoted by emp. "Average annual hours worked by persons engaged" denoted by avh. "Share of gross capital formation at current PPPs" denoted by csh_i. "Average depreciation rate of the capital stock" denoted by delta. "Share of labour compensation in GDP at current national prices" denoted by labsh. "TFP level at current PPPs (USA=1)" denoted by ctfp.\fLet us consider a Solow growth model in which the aggregate production function at time for country i {CAN, USA} is given by: vi = (k) (eirt)\" where Y} is the aggregate real GDP in country i, K is the aggregate physical capital in country i, L is the aggregate number of workers in country i, e' is the average working time of a worker parameter in country i, At > 0 is the total factor productivity parameter in country i and &' (0,1) is the labour share of output parameter in country i. The equilibrium law of motions of the physical capita per worker from time to time + in country i can be written as: (1 +n)ki, = vyl + (1 o)k} where n! (-1, +) represents the growth rate of the population of workers parameter in country i, y* (0,1) denotes the investment rate parameter in country i, (0,1) is the depreciation rate parameter in country i, y} = Y{/L. denotes the output per worker in country i and k; = K'/L: stands for the physical capital per capita in country i. b. Calculate the real GDP per worker in both Canada and in the United-States in 2019. Compute the ratio of the real GDP per worker in the United-States in 2019 to the real GDP per worker in Canada in 2019. (3 points) c. Derive a value for n' by calculating the average annual growth rate of employment (emp) in both Canada and the United-States from 2009 to 2019. (2 points) d. Calculate in both Canada and the United-States from 2009 to 2019 the average values for avh representing e', csh_i representing y', delta representing 8, labsh representing El, and ctfp representing A. (5 points) e. Using the average values found in questions c. and d., derive the ratio of the real GDP per worker in the United-States to the real GDP per worker in Canada predicted by the Solow growth model. Is this result consistent with the actual real GDP per worker gap found in question b? (10 points)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Principles Of Macroeconomics

Authors: N Gregory Mankiw

7th Edition

1285165918, 9781285165912

More Books

Students also viewed these Economics questions

Question

compare the various mapping policies in caching

Answered: 1 week ago

Question

Excel caculation on cascade mental health clinic

Answered: 1 week ago

Question

13. Give four examples of psychological Maginot lines.

Answered: 1 week ago