1. There are two islands, called A and B. On both islands, output is produced with...

 

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1. There are two islands, called A and B. On both islands, output is produced with labor and land, the latter of which is a fixed input. The two islands have the same level of productivity and the same production functions. People on both islands also enjoy the same "subsistence" level of consumption, a. However, the two islands differ in how the growth rate of population, n, is related to the real wage, w. The equations are: Island A: Island B: (w-o) n= (w-a) 1000 500 a. How do the steady state levels of population on the two islands compare? Explain. b. Suppose that on each island, half the population was wiped out by a meteor shower in the year to (very gruesome, I know). Prior to this catastrophe, both islands were in their steady states. Draw a graph showing what the real wage looks like on the two islands over time (that is, starting before. year to, and continuing for many years afterward). Use the same graph for both islands. You should clearly indicate how the levels of the real wage on the two islands compare to each other. Explain. 1. There are two islands, called A and B. On both islands, output is produced with labor and land, the latter of which is a fixed input. The two islands have the same level of productivity and the same production functions. People on both islands also enjoy the same "subsistence" level of consumption, a. However, the two islands differ in how the growth rate of population, n, is related to the real wage, w. The equations are: Island A: Island B: (w-o) n= (w-a) 1000 500 a. How do the steady state levels of population on the two islands compare? Explain. b. Suppose that on each island, half the population was wiped out by a meteor shower in the year to (very gruesome, I know). Prior to this catastrophe, both islands were in their steady states. Draw a graph showing what the real wage looks like on the two islands over time (that is, starting before. year to, and continuing for many years afterward). Use the same graph for both islands. You should clearly indicate how the levels of the real wage on the two islands compare to each other. Explain.

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a The steady state levels of population on Island A will be higher than on Island B This is because ... View the full answer