05 Jun Question Econ 2480 – Intermediate Macroeconomics II Assignment 2
Question
Econ 2480 – Intermediate Macroeconomics II
Assignment 2
20 percent of total course mark
Length and Format:
This assignment has two parts and is based on material you have covered in units 2 and 3.
Your answer for part 2 of this assignment should be 3 to 4 pages in length excluding references, tables, and diagrams. It should be typed, double spaced, 1 inch margins all around, and no more than 12 point font.
Please follow the University of Chicago style for format and references. Remember that you should express ideas in your own words, even those from the textbook. You should cite all sources that you use to support your answer.
PART 1-5%
In a neo-classical growth model, production is governed by the production function, y = k1/2, where y=Y/N and k=K/N are, respectively, output and capital (both expressed per capita). In the first year of analysis, the economy has an employed labour force of 100,000 and a capital stock of 1,600,000 units. The growth rate, N, of the labour force is 10%; and the savings rate, s, is 40%. Assume no depreciation and no technological progress
a. Calculate the initial values of y and k. Verify that the economy is on a balanced growth path.
b. Suppose the savings rate rises to 50%. Calculate the values of y, k, actual investment (sy),
and balanced-growth investment (nk) for the next year. (Hint: k1 = k0 + nk0 )
Explain what happens to capital and output in the short run and in the long run if the technological growth rate decreases.
Econ 2480 – Intermediate Macroeconomics II 1
PART 2-15%
Identify two countries of your choice, one that has recently experienced relatively strong and robust economic growth and one that has had relatively weaker economic growth. Find some economic data on both countries that you think could inform an analysis of differences in the economic growth rates of both countries. Such data might include GDP per capita measured in common currency, e.g. US dollars), unemployment rates, human capital development index, literacy rate, population growth, index of economic freedom, level of investment, savings rate, inflation rates, etc.
Required:
Prepare a report that is designed to evaluate how the differences in the economic growth in both countries can be reconciled with your knowledge of theories of economic growth. You should use economic data you gathered on both countries to justify your answers. While you are free to structure your report as you feel appropriate, it should include:
discussion of the economic conditions of both countries
2. appraisal of how growth theory can explain differences in the economic grow rates of both countries using data you gathered (You can present some of this data in graphical or table form.)
3. whether the strong growth country prospects for continued strong economic growth might be limited; and, if so, what policy you would recommend to offset this?
whether the weak growth country prospects for growth will be further limited; and, if so, what policy you would recommend to offset this?
Econ 2480 – Intermediate Macroeconomics II 2
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