Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Suppose we wanted to use the Cobb-Douglas production function to explain differences in income between Japan and Australia. (a) If Japan has higher capital per

Suppose we wanted to use the Cobb-Douglas production function

to explain differences in income between Japan and Australia.

(a) If Japan has higher capital per worker than Australia, would we then expect Japan to have a higher or lower income per capita than Australia? Explain in words.

ANSWER:

(b) Following from part (a), we then find that Australia has higher income per capita. What does this suggest about Australia's total factor productivity relative to Japan's? Explain in words.

ANSWER:

(c) Now suppose that Japan has higher human capital than Australia. Give two other possible reasons that could explain the differences in total factor productivity between the two countries.

ANSWER:

(d) Now suppose a Japanese politician wants to promote additional capital accumulation in order for Japan's income per capita to overtake Australia's. In the context of the Solow model, explain in words why capital accumulation by itself cannot lead to continued increases in income per capita.

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

Microeconomics Principles For A Changing World

Authors: Eric Chiang

4th Edition

1464186677, 978-1464186677

More Books

Students also viewed these Economics questions