Dista "1 Ch 5-6 NO TO.. DATE. FROM. 6. Consider accardiog I an economy where aggregate output Y is produced using capita

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Dista 1 Ch 5 6 No To Date From 6 Consider Accardiog I An Economy Where Aggregate Output Y Is Produced Using Capita 1 (115.93 KiB) Viewed 19 times

Dista "1 Ch 5-6 NO TO.. DATE. FROM. 6. Consider accardiog I an economy where aggregate output Y is produced using capital k auf labour L returning to scale and positive but diminishing marginal products of capitel and labour individually to the production function Y = F(KL). The production function F(K,L) has constant • The change in the capital s stock over time is AK- I-JK, where I is the investment and 8 is the Iconsteart rate at which capital depreciates, Investment! I is equal to sing saving, which is a constant fractions of income Y. The increase over time in the number of workers is AL-ul, where u is the population youth riste- Outpund per worker and capital per worker are dented by yo YA and K-KA рек - a) Derive the per-worker production function ye fil), and use a liegeam to down that there is a steady state for expritel per worker kt and output per worked y* (such a steady state must lasture AK/K=AW/L). Explain intutuely why there is no long-rom geswrth in GDP ple worker, although total GDP is still geving. (4 weeks) The population of the economy is N, not all of them are workers & The labour-muabet participation rate is p=4N. Income per worker is y= Y/N. ● Starting from the steady state found in part cal, appare there is a large one-off increase in tuber-macht participation p. 6) (3 marks) What happens to capital per werder k and output per worden y immediately afterwards? What about income per person y! after the years eX9 monds) Explain why the economy will experience grouills in incomme par person is in the ye increase in labour-market participation. Will the gourth continue in the bugsun? I d) (3 marks) What are the long-run effects of higher labour-market porticipation on the levels ky and! y? Justify your answers. 1 growth of its population (higher n) with the Now suppose the remary experiences permesrally faster. same labour-merket participation rate p.. effects on the piels of y and i. e) Use the diagram from (n) to find the
HMI **** NO. TO.. FROM DATE (t) Suppose owners of capital the receive an income equal to the marginal product of capital minis depreciation este per unit of capital Explain whether they gain or lose in the long run from the increase in population growth analysed in part (c).