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Midterm Exam 3 ECON 209: Intermediate Macroeconomics Note: Please write down your name and ID number. There are 6 pages on this exam. All students
Midterm Exam 3 ECON 209: Intermediate Macroeconomics Note: Please write down your name and ID number. There are 6 pages on this exam. All students need to answer questions 1, 2, 3, and 4. Question 5 is for ECON 209 students ONLY and question 6 is for ECON 209H students ONLY. Good luck! 1. Consider the Solow growth model. Suppose population growth rate is 2 percent, saving rate is 20 percent, and aggregate production function is Y = = F(K, N) = 2104No.6. Suppose the economy is in the steady state in year 2007, and capital per capita in the steady state is 10.079. Suppose total factor productivity is equal to 2. (a) (5 points) Find the depreciation rate in this economy. (b) (10 points) Suppose total factor productivity in year 2007 is equal to 2 (as mentioned above), and it drops to 1 in year 2008 and it goes back to 2 in year 2009. Find capital per capita and income per capita in 2008 and 2009. (c) (5 points) While total factor productivity fully recovers in 2009, income per capita in 2009 is still lower than in 2007. Explain why
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