A. Calculate (approximately) how many years it will take for real G.D.P.to double in each of the following cases. Type answers and how you got them.

i. The growth rate of China is 8%

 

ii. The growth rate of Brazil is 5%

 

 

B. In the following question (Be sure to label all diagrams appropriately for full credit)

i. Draw a supply and demand diagram of the labor market. Assume that immigration laws are relaxed causing immigrants to flow in to the country. Add to drawing. Label everything.

 

ii. Further, draw a diagram of the production function. Show on the diagrams what will happen to Real GDP as a result of the immigration policy. (Be sure to label the diagram appropriately for full credit). Type a full explanation.

 

iii. Explain in words what your diagrams show. Here you will TYPE your explanation of the two curves. Credit for the above two parts will not be given without this inclusion.

 

C. All at once the technology of the internet and cell phones are introduced to a developing country.

i. Show this impact on the production function. (Draw a before and after on the same graph). Discuss. Type numbers.

 

 

ii. What will happen to Real GDP and real GDP per person if the amount of labor in the economy remains constant when the new technology is introduced? Discuss.

iii. What will happen to productivity when the new technology is introduced? What do we use to show that productivity has gone up? Explain, in words, what is meant by an increase in productivity.

 

iv. Explain the impact of savings according to Neoclassical Growth Theory.

 

 

v. How does this relate to the concept of “tradeoffs” from earlier in the course?

 

 

 

D. What is the Role of Profit in the New Growth Theory?

 

SECTION TWO: 1.5 points

These are problems 22 and 23 on page 173. Please solve using 11th edition of text.

 

BE CERTAIN YOU ARE LOOKING AT THE 11TH EDITION.

22) Suppose that the world price of sugar is 10 cents a pound, the United States does not trade

internationally, and the equilibrium price of sugar in the United States is 20 cents a pound.

The United States then begins to trade internationally.

a)How does the price of sugar in the United States change?

b. Do U.S. consumers buy more or less sugar?

c. Do U.S. sugar growers produce more or less sugar?

 

d. Does the United States export or import sugar and why?

 

 

23. Suppose that the world price of steel is $100 a ton, India does not trade internationally, and

the equilibrium price of steel in India is $60 a ton. India then begins to trade internationally.

a. How does the price of steel in India change?

b. How does the quantity of steel produced in India change?

c. How does the quantity of steel bought by India change?

d. Does India export or import steel and why?

 

23. Suppose that the world price of steel is $100 a ton, India does not trade internationally, and

the equilibrium price of steel in India is $60 a ton. India then begins to trade internationally.

 

SECTION THREE 1 point

a)

How does one find the area of consumer surplus on a figure? Type an explanation.

b) How does one find the area of producer surplus on a figure? Type an explanation.

c) Is there a deadweight loss when consumer surplus is replaced by producer surplus? Explain.

d) What is meant by a ‘dead-weight loss? Explain.