Question

plz help with this homework, plz don't copy answers that were answered before. Thank you and write in text and not image since its hard to read from.

1. If real GDP per capita in the United States is $8,000, what will real GDP per capita in the United States be after 5 years if real GDP per capita grows at an annual rate of 3.2%? (Show your work and explain your answers.)

2. Sweden has a population of 9.05 million, and a GDP of $3.85 billion. Ireland has a population of 4.21 million, and a GDP of $2.23 billion. Which country has a higher standard of living, and why? How did you determine who has the better living standard? (Reference any academic and non-academic articles used to make this determination.)

3. Movement between which points in the following diagram would reflect only a change in technology? Movement between which points in the following diagram would reflect only an increase in the available capital per worker? If a country is already fairly wealthy, what should they concentrate more on: increasing capital per worker, or encouraging positive technological change? Why? (Explain each answer, do not just list letters.)

Real GDP per hour worked, YIL Production function Production function Production function, iC B $40 Capital per hour worked, K/L 60 OP

4. Absent any government action or policy, why might firms under-invest in research and development? What can be done (or has been done) to address this problem and help improve standards of living?

Answer 1

A) Real per capita GDP of US =$ 8000

after a year, the growth in the real GDP is 3.2% = $8000*3.2/100=256 (increase in real GDP per capita )

   total real GDP per capita = increase in real GDP Per capital + previous year real GDP per capita  

= $8000+ $ 256= $ 8256

second year , increase in real GDP per capita = $ 8256*3.2 /100= 264 . 192

total real GDP per capita after the second year = $8256+ $ 264.192=$8520.192

third-year increase in real GDP per capita = $8520.192 *3.2 /100= 272.64

total real GDP per capita after the third year = $8520.192+$272.64=$8792.83

forth year increase in real GDP per capita = $ 8792.83 *3.2/100=$ 281.37

   total real GDP per capita after the fourth year = $8792.83+ $ 281.37= $9074.20

fifth year increase in real GDP per capita=$ 9074.20*3.2/100=$290.37

total real GDP per capita after the fifth year =$9074.20+$ 290.37=$9,364.57

therefore, after the fifth year, there is a growth of $ 1,364.57 from the first year in the real GDP per capita.

B) GNP = GDP / POPULATION

Sweden GNP =$3.85 BILLION /9.05 MILLION =0.425

Ireland GNP =$2.23 billion/4.21 million =0.529

therefore, Ireland has a higher standard of living than Sweden. GNP is used to measure the living standard of people as to how the GDP or output or income in a country is distributed between the population of the country. Ireland has a lower level of the population as compared to Sweden, even though the GDP of Sweden is more, it is not enough to distribute it between people as in the case in Ireland . with more GNP, Ireland will have higher living conditions for people for ex better education facilities , healthcare , sanitation etc - and with more output/income in hand they will be able to afford higher standard of living as compared to Sweden.

C) any changes in the technology is shown by a shift in the PPC curve, therefore in the diagram shift from point C to point D reflects technology shift. whereas any changes in the capital per worker are shown by movement along the PPC curve. hence, in the diagram movement from point A to point C reflects an increase in available capital per worker.

if a country is fairly rich then, it should invest more in technology changes because it can afford technology up-gradation from time to time. it can adopt new technologies instantly can benefit from it. with the latest technology adopted it can increase its growth in an effective manner and at a fast pace.

D)government think for society as a whole, therefore for them, research and development is important so that the growth of the country increases. due to research, a lot of benefits are increased in the market, new technologies, new ideas, cost-effective techniques which generate employment and living standards of people which is important for the government. but with the absence of any initiative taken by the government , research is likely to decrease because, firms which are profit-oriented, regular research will increase their cost, and a lot of possibilities of externalities arises which may not benefit the firm  . to address the issue, one possible way is to give tax credit for research, an incentive of tax/subsidy will make firms invest more and more in research, with research and development competitiveness in a market also increases which increases the market share for a firm.