Explain all determinants of long-run output levels are same

Assignment Help International Economics

Reference no: EM13199214

In the island of Europa, taxes and regulations in the past have reduced hours worked per-capita, h-bar, relative to the neighboring island Amerika. After decades, output per-person in Europa is now lower than in Amerika.

Economist A argues that the behavior of Europa's economy is in line with the predictions of the Solow Model. She explains that all determinants of long-run output levels are the same across the two economies, expect for hours worked. Economist B explains that this cannot be possible; something else must be going on since output per-hour worked is the same across the two economies.

Using the Solow Model, carefully explain who is right.

Hint: define labor in the Solow Model as L = N*h-bar, where N stands for the number of people (workers).

Reference no: EM13199214

Questions Cloud

Common physiological change : Which of the following is not a common physiological change that happens when you are immediately stressed?

How many yards is the side of the initial square : A square's side is increased by 3 yards, which corresponds to an increase in the area by 81 square yards. How many yards is the side of the initial square?

Define nonverbal communication can affect communication : how verbal and nonverbal communication can affect communication in the following: police situations (public announcement to the press)

What are the measurements of each side : the perimeter of a four sided figure is 104 inches. the lengths of the four sides are four consecutive odd integers. what are the measurements of each side?

Explain all determinants of long-run output levels are same : Economist A argues that the behavior of Europa's economy is in line with the predictions of the Solow Model. She explains that all determinants of long-run output levels are the same across the two economies, expect for hours worked.

Find her adjusted gross income for the year : Edna Kropp's gross income for a year included salary, $12,400; commission, $27,750; interest, $440. Her adjustments to income were payments to a retirement plan, $2,000, and a penalty for withdrawing savings early from a time-deposit account, $126..

What is equivalent constant annual average return : What is the total return over the three years to an investor who buys the stock at 150p and holds the stock for three years, reinvesting intermediate dividends back into the stock? What is the equivalent constant annual average return over the thr..

Find the distance across the lake from a to c to the nearest : Find the distance across the lake from A to C to the nearest yard using the measurements 140yd 80 degrees and 160yd.

What are the costs of making the systematic mistakes. : Much has been made of the fact that people don't consistently act with scientific rationality. What is meant by rationality Consider the three "systematic mistakes" discussed in your text. What are the costs of making those "systematic mistakes".

User Account

All Pages