This topic contains a solution. Click here to go to the answer

Author Question: According to new Keyneisan theory, real wages are _____ correlated with employment and the portion ... (Read 74 times)

Yi-Chen

  • Hero Member
  • *****
  • Posts: 550
According to new Keyneisan theory, real wages are _____ correlated with employment and the portion of the population that is not in the labor market _____ with higher real wages.
 
  a. positively; rises.
  b. negatively, does not change.
  c. negatively, rises.
  d. positively; falls.
  e. none of the above.

Question 2

Given the production function Y = A and fixed values for the saving rate and depreciation, if productivity is growing at an average rate of three percent, and the labor input grows at two percent, there is a unique growth rate of capital that is
 
  sustainable. That is, if the growth rate of capital is either higher or lower than this steady-state value, then it must eventually change, even if nothing else in the economy changes. Calculate this steady-state growth rate of capital, and explain why it alone is a sustainable rate. Hint: Use the fact that the growth rates of output and capital per worker are 43 higher than the growth rate of productivity.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

shaikhs

  • Sr. Member
  • ****
  • Posts: 312
Answer to Question 1

B

Answer to Question 2

Since productivity is growing at three percent, capital per worker is growing at 4.3
( = 0.03  1.43). Since labor grows at two percent, capital must grow at 4.3 + 2 = 6.3. Putting this into the growth accounting equation: = 0.03 + 0.3  0.063 + 0.7  0.02 = 0.063. Thus, capital and output grow at the same rate. If capital were to grow at a faster rate, say eight percent, the growth of output could not keep up: 0.03 + 0.3  0.08 + 0.7  0.02 = 0.068. A growing capital stock requires enough saving to compensate for depreciation and capital dilution, but saving can increase only as fast as output. If the growth rate of capital were too low, say five percent, output would be growing faster than capital, so saving a constant fraction of output would result in investment that is increasingly large relative to depreciation and capital dilution. The investment needed to keep capital growing at a constant rate can occur only when output grows at the same rate as the capital stock.




Yi-Chen

  • Member
  • Posts: 550
Reply 2 on: Jun 30, 2018
Excellent


miss.ashley

  • Member
  • Posts: 371
Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

 

Did you know?

The term bacteria was devised in the 19th century by German biologist Ferdinand Cohn. He based it on the Greek word "bakterion" meaning a small rod or staff. Cohn is considered to be the father of modern bacteriology.

Did you know?

Hyperthyroidism leads to an increased rate of metabolism and affects about 1% of women but only 0.1% of men. For most people, this increased metabolic rate causes the thyroid gland to become enlarged (known as a goiter).

Did you know?

Cocaine was isolated in 1860 and first used as a local anesthetic in 1884. Its first clinical use was by Sigmund Freud to wean a patient from morphine addiction. The fictional character Sherlock Holmes was supposed to be addicted to cocaine by injection.

Did you know?

Pregnant women usually experience a heightened sense of smell beginning late in the first trimester. Some experts call this the body's way of protecting a pregnant woman from foods that are unsafe for the fetus.

Did you know?

The people with the highest levels of LDL are Mexican American males and non-Hispanic black females.

For a complete list of videos, visit our video library