Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Question
Chapter 8, Problem 3AP
a)
To determine
To find: The variable which is more volatile.
b)
To determine
To find: The relationship between procyclical behavior of average labor productivity and Okun’slaw.
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The production function for an economy can be expressed as Y= F(K,L), where Y is real
GDP, K is the quantity of capital in the economy, and L is the quantity of labor in the
economy.
If Y = K0.5 L0.5, what is real GDP if the quantity of capital is 900 and the quantity of labor is
а.
400?
b. What is/are the endogenous variable(s) in this model?
What is/are the exogenous variable(s) in this model?
с.
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
Write the production function in its simplest form (human capital being included in TFP) and explain the nature of each factor as well the theoretical value of the parameter Alpha. In other words what does the value of Alpha represent regarding the returns of each factors of production?
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