Reference no: EM132405761

1. An economy has government purchases of 2000. Desired national saving and desired investment are given by

S^d = 200 + 5000r + 0.10Y - 0.20G

I^d = 1000 - 4000r

When the full-employment level of output equals 5000, then calculate the real interest rate at which the goods market is in equilibrium

2. Use the growth accounting equation to calculate productivity growth, given output growth of 4.5%, capital stock growth of 4%, labor employment growth of 3%, the output elasticity of capital of 0.3, and the output elasticity of labor of 0.7.

3. A country has the per-worker production function y_t = 5k_t^0.5, where y_t is output per worker and k_t is the capital-labor ratio. The depreciation rate is 0.2 and the population growth rate is 0.05. The saving function is S_t = 0.2Y_t, where S_t is total national saving and Y_t is total output.

(a) What is the steady-state value of the capital-labor ratio?

(b) What is the steady-state value of output per worker?