Economics 219

Problem Set #9

 

 

1.    In the fourteenth century, the Black Death wiped out one-third of the population of Europe. If the capital to labor ratio was at its steady state before the Black Death, explain the path of output per capita following the Black Death. Where did it end up?

2.    Suppose that the privatization of the social security system raises the savings rate in the U.S. Explain the long run dynamics of output per capita in the U.S.

3.    During World War II, many countries (most notably Germany and Japan) lost substantial portions of their capital stock while the U.S. emerged relatively unharmed.

  1. Explain the short run impact (on interest rates, investment, and output) on Germany relative to the U.S immediately following the war.
  2. Explain the long run impact of the war on Germany’s level and growth rate of per capita output relative to the U.S.
  3. Japan’s savings rate is higher than that of the U.S.. Repeat part (b) for Japan relative to the U.S.
4.    The U.S. experienced an increase in its population growth rate following the war (the baby boomers), but there was no corresponding drop in output growth, as the Solow model of economic growth would suggest. How could this be?

5.    How might the Solow model of economic growth explain the "productivity slowdown" experienced by the United States in the 1970’s?