Question number 3

3. [Productivity, Economic Growth, and the Key Determining Factors] Consider the following relation between productivity and capital per hour for the economy. Output per Hour of Work (K/L) Work (Y IL) $40 $60 $80 $100 $110 a. Plot the productivity curve. What does the shape of this curve indicate about the relationship between output per hour of work (aka productivity) and capital per hour of work? b. Suppose that in Year 1,; = 40 and? = 70,but in Year 2,? = 60 and? = 90. How much has technology contributed to the increase in productivity between the two years? c. Now suppose that between Year 2 and Year 3, the productivity curve changes as follows: Capital per Hour of Output per Hour of Work (K/L) Work (Y/L) $20 $70 $40 $110 $60 $140 $80 $150 $100 $160 Plot the new productivity curve on the same graph as part (a). How does the new curve compare to the original? What likely caused the difference? d. Suppose that in Year 3, K/L = 80 and Y/L = 150. What is the growth rate of technology from Year 2 to Year 3, according to the standard growth-accounting formula? Round to the nearest tenth of a percent