1 Economics 295: Introduction to Macro Policy Assignment 3 Due Tuesday April 2, at beginning of class Question 1 year Real GDP (billions of constant dollars) Labour Force (millions) Employment (millions) 1960 100 1.5 1.4 1965 130 1.6 1.45 1970 175 1.75 1.55 1975 250 1.95 1.65 1980 230 2.15 1.85 1985 265 2.4 2 1990 300 2.7 2.2 1995 340 3 2.8 2000 375 3.3 3.05 2005 410 3.6 3.4 2010 450 3.95 3.7 a. Compute the employment rate and the level of productivity (GDP per employed worker) for each year shown in the table above. b. For each five-足-year period, compute the percentage change in the labour force, the employment rate and the level of productivity. c. For each five-足-year period, what fraction of the percentage change in GDP can be accounted for by the change in the employment rate? d. Over the entire 50-足-year period, what fraction of the percentage change in GDP can be accounted for by the change in the employment rate? e. Explain the differences that you detect between (c) and (d). Question 2 The Neoclassical growth theory is based on the existence of an aggregate production function, showing the relationship between labour (L), capital (K), technology (A), and real GDP (Y). The table below shows various values for L, K, and A. Assume that the production function takes the following form, ?? = ????!!??!!
2 Labour(L) Capital(K) Technology(A) Real GDP(Y) 100 200 10 150 200 10 200 200 10 250 200 10 100 200 10 150 300 10 200 400 10 250 500 10 200 200 10 200 200 30 200 200 40 200 200 50 a. Using the production function shown above, compute real GDP for each case and complete the table. b. In the first part of the table, capital is constant but labour is increasing. What property of the production function is displayed? Explain. c. In the second part of the table, capital and labour are increasing by the same proportion. What property of the production function is displayed? Explain. d. What type of growth is being shown in the third part of the table? Question 3 For…