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    Econ 201 Tutorial 1 2023

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    Nomvelo
    This document outlines an economics tutorial covering several topics: 1. It defines economic growth and distinguishes it from growth in GDP per capita. 2. It compares linear and Cobb-Douglas production functions and derives equations for real wage and interest rates. 3. It uses growth accounting to calculate total factor productivity growth under different output and labor growth scenarios.

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    Econ 201 Tutorial 1 2023

    Uploaded by

    Nomvelo
    14 views2 pages
    This document outlines an economics tutorial covering several topics: 1. It defines economic growth and distinguishes it from growth in GDP per capita. 2. It compares linear and Cobb-Douglas production functions and derives equations for real wage and interest rates. 3. It uses growth accounting to calculate total factor productivity growth under different output and labor growth scenarios.

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    practice

    Original Title

    ECON 201 TUTORIAL 1 2023 (6)

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    This document outlines an economics tutorial covering several topics: 1. It defines economic growth and distinguishes it from growth in GDP per capita. 2. It compares linear and Cobb-Douglas production functions and derives equations for real wage and interest rates. 3. It uses growth accounting to calculate total factor productivity growth under different output and labor growth scenarios.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    14 views2 pages

    Econ 201 Tutorial 1 2023

    Uploaded by

    Nomvelo
    This document outlines an economics tutorial covering several topics: 1. It defines economic growth and distinguishes it from growth in GDP per capita. 2. It compares linear and Cobb-Douglas production functions and derives equations for real wage and interest rates. 3. It uses growth accounting to calculate total factor productivity growth under different output and labor growth scenarios.

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    © All Rights Reserved
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    You are on page 1of 2

    ECON 201 TUTORIAL 1 2023

    PART A: DEFINITIONS AND CONCEPTS

    1. Define economic growth.


    2. What is the difference between economic growth, and the growth in GDP per
    capita?
    3. Show how a linear production function is different from a constant elasticity of
    substitution Cobb Douglas production function.

    PART B: GROWTH ACCOUNTING EQUATIONS

    1. Given a Cobb Douglas of the form 𝑌 = 𝐴𝐾 q 𝑁 !"q , and assuming a competitive


    market, derive the equation of the real wage rate.
    2. Given a Cobb Douglas of the form 𝑌 = 𝐴𝐾 q 𝑁 !"q , and assuming a competitive
    market, derive the equation of the real interest rate.

    Suppose that output grows at 5% per annum and that the share of labour in total
    income is 0.80.

    3. If capital and labour grows at 5% and 5% respectively, what is the growth rate
    of total factor productivity?

    Suppose that output grows at 10% per annum and that the share of labour in
    total income is 0.80.

    4. If capital and labour grows at 10% and 10% respectively, what is the growth
    rate of total factor productivity?
    5. What can we conclude about Total Factor Productivity by looking at the
    outcomes above?
    6. What is the contribution of capital growth and labour growth to the growth rate
    of output, IN THE SECOND SCENARIO?
    7. Given your answer in (6) above, which factor of production has the highest
    contribution to the total output growth rate? Why?

    PART C: NEOCLASSICAL GROWTH THEORY


    ECON 201 TUTORIAL 1 2023

    Using the neoclassical theory of growth, assume that in Country A the savings rate is
    0.5, output per person is 10, the population growth rate is 9%, the depreciation rate is
    3% and the current capital labour ratio is 10.

    1. Is the economy at a steady state? Provide numerical workings to support your


    answer.
    2. Sketch a Solow (neoclassical) growth model diagram, and indicate the position
    of Country A clearly on the diagram.
    3. Given your calculations above, will output per person change? Explain your
    answer.
    4. What is the level of investment required to maintain the steady state capital-
    labour ratio if the steady state level of output per person is 20?

    PART D: THE GROWTH PROCESS

    1. With the aid of a well labelled diagram illustrate the effect of an increase in the
    savings rate on the steady-state level of output per-capita and the rate of long-
    run economic growth.

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