Macroeconomics for Managers Assignment

 

Macroeconomics for Managers

Assignment

Instructions. You can but do not have to do this assignment in a group. If you work in a group, it can have at most three people.

The submission process will have two steps:

  • Group formation: Students wanting to submit as a group will first need to form their assignment group through the Canvas LMS site (under the People tab). Students completing the assignment alone do not need to form a group. Assignment groups must be formed no later than 10am on Wednesday May 19. This is a strict deadline and cannot be extended for any student. Students

can form an assignment group with any other students (up to a group size of three), they do not have to be from the same tutorial group.

  • Submission: Assignments can only be submitted after group formation has closed, i.e., from 10am, May 19. Assignments are submitted through the Assignments section of the Canvas LMS site.

Late assignments. Late assignments will not be accepted. Please apply for Special Consideration if for some documented reason you cannot submit by the due deadline.

Marking criteria.     The tutors will mark the assignment according to the following criteria:

  • Ability to use material discussed in lectures, tutorials, and other sources to answer the assignment questions in a logical and coherent fashion (90 per cent weight).
  • Overall presentation of the assignment. This includes spelling, grammar, correct construction of diagrams, etc. (10 per cent weight).
  • The maximum assignment length is 800 words.
  • Please note that the University and the teaching staff take academic integrity seriously. Please be aware that plagiarism and collusion are unacceptable. Further details can be found in the subject guide.

Macroeconomics for Managers: Assignment                                                      2

Questions.

  1. Growth Accounting (8 marks).

Below are data on the levels of aggregate output (Y ), capital (K), the amount of labour working in production (LY ), and the population (L) for 2005 and 2011.

  2005 2011
Y 1 1.056
K 1 1.084
LY 1 0.985
L 1 1.063

Complete the following table. Then, solve for the average annual growth rate of total factor productivity (A) using the production function . To do so, you should derive a growth accounting formula for y = Y/L and use the values you have entered in the table. (Note: When computing the average annual growth rate, you may report the compound annual growth rate.)

  2005 2011 average annual growth rate
Y 1 1.056  
K 1 1.084  
LY 1 0.985  
L 1 1.063  
y (= Y/L) 1    
k (= K/L) 1    
lY (= LY /L) 1    
  1. Solow-Swan Model (12 marks).
    • You will demonstrate the importance of diminishing returns to capital in the Solow-Swan model. Draw a Solow-Swan diagram in which there are constant returns to capital. This would happen if the production function were Yt = AKt, where A = 1. Furthermore, assume that the sum of population growth and the depreciation rate is greater than the saving rate. Does the economy converge to a steady state in this case? To answer this question, you should draw a Solow-Swan diagram in terms of output per person, as we did in class. Use this diagram to explain why the economy converges to a steady state or not.
    • Assume, instead, that the sum of population growth and the depreciation rate is equal to the saving rate. Are there steady states? If yes, what are the steady states capital per person? (Note: A diagram is not needed for this part.)