Econ 375-Economic Growth Quiz 1 by xiaoyounan

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									                   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
table.


                                1760             1860               1960

 Output

 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
                                                                                                 R*

  Percent Change in Labor
                                                                                                 L*

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




                                                  Page 1
               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
     important?

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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