Download 8 Problems on Economic Analysis of Technology Change - Exam 1 | ECON 4110 and more Exams Economics in PDF only on Docsity! ECON 4110 J. D. Adams Economic Analysis of Technological Change Rensselaer Polytechnic Institute Sample First Midterm This examination is worth 120 points or 30% of your grade and it covers Lectures 1-7. Please write neatly and in ink and show your work when asked to do so. 1. The Solow model is composed of a production function and an equation for the accumulation of capital, as shown below: 1)(ALKY (Production Function) KdYsK K (Accumulation of Capital) All the terms are as defined throughout the term. In addition to the above, labor-augmenting technology grows according to gteAA 0 , and labor grows according to nteLL 0 . Please answer the following questions. a. Find the growth rate of technology. b. Find the growth rate of labor. c. Using the definitions ALKkALYy / ~ ,/~ , which are output and capital per effective unit of labor, find the equilibrium value of k ~ . d. Find the equilibrium value of y~ . e. Write the equation describing the evolution of output per person LYy / in steady state growth. 2. Use the Solow model to confirm or deny the propositions listed below: a. An increase in the share of investment in output increases the rate of growth in both capital and output per effective unit of labor in the short run. b. An increase in the share of investment in output raises the level of output per effective unit of labor, but not the growth rate of output, both in the long run. c. An increase in the rate of population growth decreases the rate of growth in both capital and output per effective unit of labor in the short run. d. An increase in the rate of population growth decreases the level of output per effective unit of labor, but not the growth rate of output, both in the long run. 2 ECON 4110 J. D. Adams Economic Analysis of Technological Change Rensselaer Polytechnic Institute Sample First Midterm 3. Use the table below to answer the questions immediately following. a. Do the sources of economic growth listed below the line noted as “output per hour” add up to total growth? b. What does the term “labor composition” refer to? c. What does “multifactor productivity” mean? d. How have the sources of economic growth changed over time, according to this table? 4. The key differential equation of the neoclassical (Solow) model is given below: )( ~ ~ ~ 1 dgnks k k K Use this equation to answer the questions listed below. a. True or false, and explain. “The further an economy is below its steady state, the faster it should grow. The further an economy is above its steady state, the slower the economy should grow.” b. True or false, and explain. “Output per person grows more slowly in countries that have initially higher income, and more rapidly in countries that have initially lower income.” Table 2.1
