Capital’s share of total income is about 10% in both Colombia and Costa Rica. The capital–labor ratio is $15.25 thousand per worker in Colombia and $23.12 thousand per worker in Costa Rica. Real GDP per worker is $12.18 thousand in Colombia and $13.31 thousand in Costa Rica. Predict what will happen to the capital stocks […]

How do increases in total factor productivity increase the standard of living? What factors cause total factor productivity to change? What is human capital? How does the acquisition of human capital improve the quality of labor? What are the two basic ways in which workers can acquire human capital?

What does it mean to say that an economy is “accumulating capital”? Why does the marginal product of capital decrease as capital is accumulated? What is the difference between a stock variable and a flow variable?

An article in the Economist argues, “As China’scapital accumulates, its population ages and its villages empty, saving will grow less abundant and good investment opportunities will become scarcer.” a. Why might an aging population lead to a lower saving rate? Why might China’s saving rate fall as it accumulates more capital? b. Discuss the likely

What is depreciation? Explain what happens to the depreciation line when the rate of depreciation increases and when it decreases. Use a graph to show the effect of an increase in the depreciation rate on the steady-state level of the capital–labor ratio and level of real GDP per worker.

Suppose that the production function for aneconomy is given by y = k1>4. The depreciation rate is 10%, and the saving rate is 20%. a. Find the steady-state capital–labor ratio for this economy. b. Find the steady-state real GDP per worker for this economy. c. Find the steady-state levels of investment per worker and consumption

Suppose that all economies have the same value for capital’s share of income. A developed country has a saving rate of 28% and a population growth rate of 1% per year. A less-developed country has a saving rate of 10% and a population growth rate of 4% per year. In both countries, the rate of

How would your answer to problem 4.6 change if, in addition to the loss of capital stock, the natural disaster also caused a permanent reduction in the rate of labor-augmenting technological change?

In 2011, the growth rate of the United States  Was about 1.5%, and real GDP per capita was about $48,100. The growth rate in India was 7.2%, and real GDP per capita was about $3,700. The growth rate in Kenya was 6.1%, and real GDP per capita was about $1,700. Is it possible that the

Why does growth occur in AK growth models?Why does growth occur in two-sector growth models? Which is more likely to increase the growth rate of the standard of living: a decrease in income tax rates or a tax cut targeted at corporate spending on research and development? Briefly explain.