1. Now consider the realistic scenario where the employment-to-population ratio in France fell to eventually reach a level 75% that of the US, consistent with the information in Exhibit 2. To be precise, suppose that the US employment-to-population ratio is constant, but that the one in France is 125% that of the US from 1950 to 1955; 100% that of the US from 1955 to 1975; and 75% that of the US from 1975 onward. How does this affect the level of output per capita in France relative to the US in the long run? Is this more consistent with the evidence presented in Exhibit 1? What is the impact of this development on the growth rate of output per capita in the short run (i.e., in the years following 1955) and long run?

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The first step before addressing the assignment questions below is to set up the simulation. Please note that it is important to follow the guidance in this section in order to answer the questions correctly. Complete the \"US\" column of the table in the \"Inputs and Figure\" sheet of the Excel workbook provided on Blackboard. Here are the inputs: 0 Starting population: 150 (in millions, but just write it as 150) 0 Starting capital: 10,000 0 Starting total factor productivity: 10 0 Population growth rate: 2% o Employmenttopopulation ratio: 40% 0 Investment rate: 30% c Total factor productivity growth: 0% (will be changed later in the analysis) 0 Depreciation rate: 5% Now complete the rest of the table by inputting the parameters in the "France/US\" column of the spreadsheet. Note that changing this ratio will automatically change the input in the \"France\" column, which will make your life easier for future questions. In the case of France, let us assume for now that all values are the same as for the United States except for the following: 0 Starting population: 45 (in millions), which is 30% that of the United States 0 Starting capital: 250, which is 2.5% that of the United States 0 Employmenttopopulation ratio: 50%, which is 125% that of the United States Your next task is to use the inputs to compute different quantities in 1950 in the United States according Your next task is to use the inputs to compute different quantities in 1950 in the United States according to the Solow model. To do this, fill out the missing cells in row 5 of \"US Projected Growth\" while referencing the parameters from the "Inputs and Figures\" spreadsheet whenever necessary. Notice that to facilitate yourjob, the input cells have been labeled (e.g., in calculating investment in cell H5 you can reference \"irateus\"). In addition, note that in order to calculate production you will need to use the production function Yt=At*Kt'3*Nt'7. You can doublecheck your work by looking at row 5 of the \"US Partial Answer\" worksheet. Now fill out the missing cells in row 5 of \"France Projected Growth\" in an analogous fashion.|