Intermediate Macroeconomics (23568) Tutorial 2 - Questions
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Tutorial 2 - Questions
Intermediate Macroeconomics (23568)
1. Considertwo countries that share the same production function, Y = A×K1/4N3/4 but differ in the available resources. These are
• Country A: A = 6, K = 4000 and N = 600
• Country B: A = 6, K = 4000 and N = 620
Wherever you find it useful, you are encouraged to use graphs to assist in your explanations.
(a) What is the output level produced in country A?
(b) What is the MPK for country A?
(c) What is the MPN for countryA?
(d) What is the MPK for country B?
(e) What is the MPN for country B?
(f) Provide an economic (not mathematical) explanation for why the MPN in
country A is different than the MPN in country B.
(g) Provide an economic explanation for why the MPK in country A is different than the MPK in country B.
For the following, suppose that country A experiences an increase in the value of K from 4000 to 4200.
(h) Suggest some event that can produce an increase in K.
(i) What is the new level of output?
(j) Calculate the new MPK based on the new higher K?
(k) What happens to the MPN as a result of the change in K?
2. Consider the Solow Growth Model for an economy with the following parameters:
(a) Derive the Steady State (fixed point) values for y, c, i, and k.
(b) Drawthe production function and supporting curves to capture the economy at its steady state.
2022-03-18