Graduate Macroeconomics, Dr.Jie Chen, Spring 2007, Management School, Fudan University, jiech@fudan.edu.cn Home Assignment 1
Economic Growth
1. Find the elasticity of output per unit of effective labour on the balanced growth path, y*, with respect to the rate of population growth, n. If αK(k*)=1/3, g = 2%, and δ = 3%, how much y* will change if the population growth n drops from 2 percent to 1 percent?
2. Consider two economies indexed by i = 1, 2. Yi = Ki(t), and Ki(t)?siYi(t), where θ > 1. Suppose that two economies have the same initial value of capital stock K, but differs in saving rate, s1 > s2. Show that the ratio between Y1 and Y2 is continuing rising. Consumption
3. Consider group A and B. The average income of group A is less than that of group B, but fluctuates more than B. Then, what the Permanent-Income hypothesis will predict the differences between the estimated consumption functions for group A and B?
Due on May 18, 2007
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