Real GDP in Canada is produced using the following production function: Y = AKLZ Where A,...

 

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Real GDP in Canada is produced using the following production function: Y = AKŻLZ Where A, is productivity, K, is the capital stock, and N₁ is the size of the labor force. Households save a constant fraction of output: S = 0.3Y The labor force grows at a rate of 1% and capital depreciates at a rate of 2%. a. Suppose that during the year 2018 real output in Canada increases by 5%. The capital stock grows from 1,000 to 1,200 and the labor force grows at a rate of 1%. What is the contribution to the economic growth of capital, labor, and productivity? b. Suppose that productivity is constant at A₁ = 4. What is the steady-state capital per capita, output per capita, and consumption per capita? Show your answer on a diagram with capital per capita on the horizontal axis and savings, output, and investment per capita on the vertical axis. c. Suppose there is an increase in productivity, which becomes A-5. How would it impact the new steady state capital, output and consumption per capita? Explain either by computing or using the equations and draw a diagram and explain how it differs from your diagram in part b.. Real GDP in Canada is produced using the following production function: Y = AKŻLZ Where A, is productivity, K, is the capital stock, and N₁ is the size of the labor force. Households save a constant fraction of output: S = 0.3Y The labor force grows at a rate of 1% and capital depreciates at a rate of 2%. a. Suppose that during the year 2018 real output in Canada increases by 5%. The capital stock grows from 1,000 to 1,200 and the labor force grows at a rate of 1%. What is the contribution to the economic growth of capital, labor, and productivity? b. Suppose that productivity is constant at A₁ = 4. What is the steady-state capital per capita, output per capita, and consumption per capita? Show your answer on a diagram with capital per capita on the horizontal axis and savings, output, and investment per capita on the vertical axis. c. Suppose there is an increase in productivity, which becomes A-5. How would it impact the new steady state capital, output and consumption per capita? Explain either by computing or using the equations and draw a diagram and explain how it differs from your diagram in part b..

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SOLUTION a Real output greauth dydut 5 or 005 Capital stock greaus fream 1000 to 1050 10501000 005 i... View the full answer