Please help me with Analytical Question no.1 Please show all work CHAPTER 5 TOTA
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Question
Please help me with Analytical Question no.1
Please show all work
CHAPTER 5 TOTAL FACTOR PRODUCTIVITY, HUMAN CAPITAL AND TECHNOLOGY 103 on 5.5) Is it better to develop your own technological champions or to rely on foreign dire nvestment? ection 5.6) Will scarcity of resources return us to the world envisaged by Thomas Malthus or will technology overcome this limitation? ANALYTICAL QUESTIONS ection 5.1) Consider an economy in which output inperiod t is produced by the Cobb-Douglas production function ALK L Y, is output at time t: K, is capital at time t L is labour employed a time t: A, is TFP at me t (You can review the Cobb-Douglas function in Chapter 3.) Saving, which equals gross invest ment, is 25% of output. The depreciation rate of capital is 5% in the period. Initially, TFP is constant at 1, labour input is constant at 100, and b is 0.3 (a) Calculate the initial steady-state level of output (b) What happens in the short run if TFP suddenly rises from 1 to 1.2? (c) What is the new long-run level of steady-state output, assuming TFP stays at 1.2? (d) What is the growth in the capital stock between the old steady state and the new one? (Section 5.2) Consider an economy in which output in period tis produced by the Cobb-Douglas production function: Y. A.HK KOL Y, is output at time t; K, is capital at time Lis labour employed at time t: A, is TFP at time t: HK, is human capital: and a and b are both greater than 0 (a) What happens to GDP when human capital is increased? (b) Assuming 0 k a 1, what shape is the marginal product of human capital? (c) As K is increased, what happens to the marginal product of human capital? 3. Section 5.2) What do you think accounts for the results of Table 5 4. (Section 5.3) visit http://info.worldbank.org/governance/wgisc country.asp/and compare the institutional quality of two countries of your choice 5. (Section 5.3) The quality of financial institutions is important for the level of TFP Consider the merits and demerits of bank-based systems compared to those relying on equity markets. Should governments privatize the financial system or leave it under state control? 6. (Section 5.3) Consider Table 5.3 and assess the relative importance of investment, education, and TFP in explaining cross-country income differences. 7. (Section 5.4) What difference is there between invention and innovation? How do these affect the marginal product of capital over time? 8. (Section 5.4) What explanations can you suggest to account for Figure 5.12? Why do some coun tries do more R&D; than others? Does this matter?Explanation / Answer
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