Name:, ECON3230 FALL 2017 Part II: Problems - 16 points each Directions: Complet

Question

Name:, ECON3230 FALL 2017 Part II: Problems - 16 points each Directions: Complete problems 1, 2 and either 3 or 4 on the pages provided. Show all work and, when necessary, round all answers to 2 decimal places. 1. Economic Grouth: (16 Points) Consider the table below containing data for Germany and Japan from 1979 and 2008: uctivit 2008 1979 Germany $42,403.00 $42,451.00 0.33 Japan $27,423.00 $44,737.00 0.48 2008 0.49 0.51 1979 (a) Calculate Real GDP per capita (RGDP pc) for both countries in (5 points): i. 1979 i. 2008 (b) When considering only the above data, what is the primary cause for Germany's increase in RGDP pe from 1979 to 2008? (2.5 points) (e) When considering only the above data, what is the primary cause for Japan's increase in RGDP pe from 1979 to 2008? (2.5 points) (d) Assume that average labor productivity (ALP) in Japan starts growing at an annual growth rate of g-0.015 from 2008 onward i. Use the Rule of 72 to determine how long it will take ALP in Japan to double. (3 points) ii. If the share of the population employed remains fixed at its 2008 level and ALP grows at the specified rate, calculate RGDP pe for Japan in 2050. (3 points)

Explanation / Answer

1. (a) Labour Productivity = Output/No. of people employed

Therefore, Real GDP per capita = Share of population*Average Labour Productivity

Find out the corresponding values from the table and calculate accordingly. For example, calculate (0.33*42403) to get the answer to i. and so on.

(b) Increase in the share of population employed is responsible.

(c) Increase in the share of population employed is responsible.

(d) The Rule of 72 gives you the time required to double your investment at a given annual rate of return. Here, g = 1.5%

72/ g = No. of years taken to get double the ALP = 72/1.5 = 48 years.

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