Econ 375-Economic Growth Quiz 1 by xiaoyounan


									                   Econ. 375, Economic Growth- Quiz 1
                                                Spring 2009

Consider the data from a hypothetical country given in the table below. Fill in the empty cells in the

                                1760             1860               1960


 Amount of Land                         50              100                 150

 Amount of Labor                       100            1000                 5000

 Price of Land                    $25.00            $50.00             $100.00

 Price of Labor                   $50.00           $100.00             $200.00

 Factor Share of Land

 Factor Share of Labor

Compute the relative role of the increase in inputs to the productive process and the increase in
productivity in causing economic growth in this hypothetical country from 1760-1860 and 1860-1960.

                                       1760                1860             1960
       Index of Factors                                                                        I=RaLb
     Factor Share of Land
  (average of factor share in                                                                     a
      year 1 and year 2)
    Factor Share of Labor
  (average of factor share in                                                                     b
      year 1 and year 2)

  Percent Change in Output                                                                       C*

   Percent Change in Land

  Percent Change in Labor

   Change in Total Factor                                                                 F*=C*-aR*-bL*

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               Econ. 375, Economic Growth- Quiz 1
                                          Spring 2009
1. What percentage of economic growth in the two periods 1760-1860 and 1860-1960 was
   attributable to the accumulation of inputs and improvements in productivity?

2.    As the economy has grown has the contribution of improved productivity become more or less

3. How does this compare to the experience of the USA during the same period?

4. What type of lessons can a poor country interested in fostering economic growth today draw
   from the experience of this hypothetical country? How are these lessons different from lessons
   drawn from the US growth experience?

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