Question 3a) Consider an economy in which the labour force grows by 2.7 percent perannum, while the capital stock grows by 4 percent per annum. Suppose 55percent of national income goes to labour and 45 percent to capital.i.If the Solow residual were zero what rate of growth would the economyachieve?ii. The country's actual rate of growth has been 4.5 percent per annum, whichis faster than the growth rate generated by the accumulation of capitaland labour stocks. Calculate the value of the residual.iii. Which input, capital or labour contributes most to the 4.5% growth inoutput? What proportion of the growth in output is the contribution ofcapital and labour?b) From 2001 to 2020 Ghana's growth rate averaged 5.3 percent per year.The period's production function was Y=F (K, H, AL), where all variableshave their usual meaning. A recent growth-accounting study showed thatthe residual accounted for only 0.8 percent per year to the growth rate.This growth-accounting analysis used weights of 0.43 for labour (L) and0.36 for physical capital (K):4i.) Ghana's labour force and human capital grew by 4.6 percent and5.8 percent respectively per year during this period. What can youconclude about the annual growth rate of Ghana's capital stock(physical capital stock)?ii.)What fraction of the overall 5.3 percent growth rate is attributableto capital investment (physical and human capital combined)?

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Consider an economy in which the labour force grows by 2.7 percent per annum, while the capital stock grows by 4 percent per annum. Suppose 55 percent of national income goes to labour and 45 percent to capital. If the Solow residual were zero what rate of growth would the economy achieve? The country's actual rate of growth has been 4.5 percent per annum, which is faster than the growth rate generated by the accumulation of capital and labour stocks. Calculate the value of the residual. Which input, capital or labour contributes most to the 4.5% growth in output? What proportion of the growth in output is the contribution of capital and labour?

Consider an economy in which the labour force grows by 2.7 percent per annum, while the capital stock grows by 4 percent per annum. Suppose 55 percent of national income goes to labour and 45 percent to capital. If the Solow residual were zero what rate of growth would the economy achieve? The country's actual rate of growth has been 4.5 percent per annum, which is faster than the growth rate generated by the accumulation of capital and labour stocks. Calculate the value of the residual. Which input, capital or labour contributes most to the 4.5% growth in output? What proportion of the growth in output is the contribution of capital and labour?

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter20: Economic Growth In The Global Economy

Section: Chapter Questions

Problem 2P

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