ESSENTIALS OF ECONOMICS
11th Edition
ISBN: 9781260225334
Author: SCHILLER
Publisher: RENT MCG
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Question
Chapter 2, Problem 5P
To determine
(a)
Percentage change in output when workforce grows by 1% and productivity does not change.
To determine
(b)
Percentage changes in output when the workforce grows by 1% and productivity rises by 3%.
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Students have asked these similar questions
Assume that total output is determined by this formula:
number of workers × productivity = total output
Hint: Assume there are 100 workers and each worker produces $100 of output.
If productivity increases by 3 percent and the number of workers increases by 2 percent a year, how fast will output grow?
0.5 0.5
Given a production function: Y = AK N If output grows at 5%, capital grows at 2% and the number of
workers grows at 4%, then technology (or total factor productivity) grows at % ? (Answer in integer only,
no decimal place.) Your Answer: Answer
Given a production function: Y = AK0.5 N0.5. If output grows at 5%,
capital grows at 2% and the number of workers grows at 4%, then technology (or
total factor productivity) grows at %?
(Answer in integer only, no decimal place.)
Your Answer:
Answer
The determinants of productivity
Consider a simple economy whose only industry is fishing. In this industry, productivity—the amount of goods and services a worker can produce per hour—is measured by the number of fish one fisherman catches per hour.
In the following table, match each example to the productivity determinant it represents.
Examples
Human Capital per Worker
Natural Resources per Worker
Physical Capital per Worker
Technological Knowledge
The fertile waters in which the fish feed and breed
An advanced mapping system that determines the likelihood of finding fish schools in different depths and locations
The skills workers develop through training before working on and piloting boats
The boats in the fishing fleet
Knowledge Booster
Similar questions
- Suppose you are given data on the rate of growth of GDP, capital, and labour, and the share of these two factors in GDP. How would you calculate the contribution of Total Factor Productivity to growth? Explain it verbally and formally.arrow_forwardConsider a simple economy whose only industry is fishing. In this industry, productivity is measured by the number of fish one fisherman catches per hour. In the following table, match each example to the productivity determinant it represents.arrow_forwardSuppose a country has a population of 120 people, a working-age population of 100 people, its labor force participation rate is 0.5 (50%), and the quantity of output is 60 units. Suppose that the production function of the economy is given by Y=2N, where Y represents the quantity of output and N represents the number of workers needed to produce the output. I know the answer is 0.4 but I don't understand how to get it. Thank you!arrow_forward
- Suppose an economy’s production function is Y = AKαL1−α. If the annual rate of economic growth is 3.5 per cent and labour and capital are both growing by 2 per cent annually, what contribution to growth is made by total factor productivity? You can assume that labour receives 75 per cent of the total income generated in this economy.arrow_forwardWhy does adding capital to a production function make the economy more productive? What are diminishing returns to capital? How does technology affect productivity and growth?arrow_forwardExplain why a fall in economic growth could lead to a rise in unemployment. Use a diagram to support your answer.arrow_forward
- What is a significant factor in long-run economic growth that Robert Fogel, an economic historian, is best known for suggesting?arrow_forwarda) 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. i. If the residual were R = 0, what rate of growth would the economy achieve? Calculate the value of the residual (R) if the country's actual rate of growth has been 4.5 percent ii. per annum. b) Suppose that a developing economy can be modeled with the Solow growth model. The constant returns to scale production technology is: Y(t) = K(t)“ H(1)* (A(t)L(t))* Where Y(t) is output, K(t) is physical capital, H(t) is human capital, A(t) is the level of technology, and L(t) is labour. The parameters a, º and A are positive and there is perfect competition in the markets for output and the inputs. Assume that during the 2005-2018 period, the country's growth rate averaged 8.5 percent and a recent growth-accounting study showed that the residual accounted for only 1.2 percent of…arrow_forwardA country has a Cobb-Douglas production function given by: Y = AK0.5H0.1 If total factor productivity is 46, human capital is 1,828, and the capital stock is 2,736, what will this country's GDP be? Do not round until your final answer, when you may round to two decimal places. Country A produces GDP according to the following equation: GDP 5K and has a capital = stock of 13,399. If the country devotes 13% of its GDP to producing or repairing investment goods, how much is this country currently investing? Rounds your answer to two decimal places.arrow_forward
- a) What are the main drivers of economic growth in real incomes per head?b) Why does a higher investment rate not lead to a permanent increase in the growth rate of real incomes per head?c) What have been the main benefits of economic growth over the past century or so?d) What are the potential negative effects of growth in recent decades and in the foreseeable future?e) What is the “productivity puzzle” and how is it linked to economic growth?arrow_forwardAn article in the Wall Street Journal observes: “For 2008, productivity grew an astounding 2.8% from 2007 even as the economy suffered through its worst recession in decades.” How is it possible for labor productivity to increase if output is falling?arrow_forwardAn increase in labor productivity means businesses will produce more output with the same amount of labor. Explainarrow_forward
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