Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
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Question
Chapter 5, Problem 10E
(a)
To determine
Identify whether the growth rate of per capita GDP when the investment rate doubles.
(b)
To determine
Identify whether the growth rate of per capita GDP when the productivity level increases by 10 percent.
(c)
To determine
The growth rate of per capita GDP when the earthquake destroys 75 percent of capital stock.
(d)
To determine
Identify whether the growth rate of per capita GDP due to immigration causes the population to double.
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Q5 Suppose in a Solow model, we have the following parameter values: n = 0, s = 0.5, a = 0.3. There
is no growth in the total factor productivity so that A, = A = 1. Moreover, we know that at time 0,
the economy is at a steady state so that k = k, =1. Now imagine that a foreign power invaded this
%3D
country. 1% of the population was killed and another 14% of the population fleeded the country to
avoid violence. Moreover, 15% of capital stocks were destroyed. All of this happens in period t=1.
After that, the war ended and there was no more destruction of capital or loss of population (but the
refugee permanently settled outside of the country and will never return0. What is the growth rate of
per-capita output in period t =4?
All values are 2005 dollars.
Part a) Calculate the growth of GDP/capita in each column.
Part b) Calculate the average annual growth in GDP/capita for japan, uk, and USA from 1980 to 2010 using the growth formula in the image. In the growth function, t is the current time period, t-j is the original time period, and g is the annual growth rate.
Part c) In parts a and b, are the calculated values for nominal gdp/capita or real gdp/capita. Explain why.
Assume the carrying capacity of the earth is
9
billion. Use the 1960s peak annual growth rate of
2.1%
and population of
3
billion to predict the base growth rate and current growth rate with a logistic model. Assume a current population of
6.8
billion. How does the predicted growth rate compare to the actual growth rate of about
1.2%
per year?
Chapter 5 Solutions
Macroeconomics (Fourth Edition)
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