[SOLVED] ECON2102 Macroeconomics 2 Tutorial 1 Additional Tutorial Questions

ECON2102 – Macroeconomics 2

Additional Tutorial Practice Questions

Tutorial 1

Question 1 – Show, in a general equilibrium setting, where national income distributed to capital is expressed as α and 0 < α < 1, that payments to capital and labour sum up to total output (Hint: assume the standard Cobb-Douglas production function discussed in class).

Question 2 – Consider the production function:  where 0 < α < 1

a) Derive an expression for the growth accounting formula.

b) Which of the terms in the growth accounting formula are proportional to the growth rate of real GDP?

c) What is the contribution of the growth in labor to growth of real GDP?

d) What is the contribution of the growth in capital to growth of real GDP?

e) What is the percentage growth rate of real GDP if technology increased from 100 to 101, capital increased from 50 to 52 and labour increased from 60 to 61? Suppose the ratio of the share of income to labour to the share of income to capital is 3.