Macroeconomics Study Set 62

Answer:

Following table shows the labor output per hour for various countries:
The labor productivity growth rate is computed by using the following formula:
……(1)
Where,
= Current period output
= Previous period output
Labor productivity growth rate: Country A
Substitute respective values in Equation (1) to find the labor productivity growth rate for the Country A.
Hence, the growth rate of Country A is
Labor productivity growth rate: Country B
Substitute respective values in Equation (1) to find the labor productivity growth rate for the Country B.
Hence, the growth rate of Country B is
Labor productivity growth rate: Country C
Substitute respective values in Equation (1) to find the labor productivity growth rate for the Country C.
Hence, the growth rate of Country C is
Labor productivity growth rate: Country D
Substitute respective values in Equation (1) to find the labor productivity growth rate for the Country D.
Hence, the growth rate of Country D is
Yes, in case of Country C, the initial productivity was lower, but it achieved higher productivity growth rate. Country C's initial productivity per hour was $2, but it registered a 50 percent growth rate, which is highest among all the four countries.

Answer:

Prices expected to increase
• Football tickets
• Household services
• Driving lessons
Price increases rapidly
The price of household cleaning services, football tickets, and the driving lessons are expected to increase rapidly because of the following reasons:
• These services are less demand elastic.
• Less competition in the market.
Hence, by rising the price, the seller will not lose the consumer.
On the other hand, the prices of cable television rates and internet access may not increase rapidly.
• Demand of these services is highly elastic.
• These markets are highly competitive.
Since competition is the price killer, the producer cannot increase the prices of cable television and internet access.

Answer:

Impact of education on economic growth
The level of education has greater impact on the productivity of the labor. The labor who has the higher educational qualification, has higher productivity and vice versa. The productivity is directly positively related to the economic growth of the country; that is, if the productivity of the labor is high, then the country has higher economic growth rate and vice versa.
The average level of education in the less developed countries is very low; medium in the developing countries; and higher in the developed countries.
a. Impact of education on economic growth of Mozambique
Since the level of average education in the less developed country is very low, the labor in the less developed country has low productivity. Therefore, the growth rate of the country is very low.
The best educational policy would promote higher amount of increase in the average education, which in turn increases the large amount of productivity which results in faster economic growth.
Since Mozambique is an under-developed country, the best educational policy has increased the average level of education by a greater amount which causes higher growth rate of the country.
b. Impact of education on economic growth of Brazil
Since the level of average education in the developed country is moderate, then the labor in the developed country has moderate productivity. Therefore, the growth rate of the country is moderate.
The best educational policy would promote medium amount of increase in the average education, which in turn increases the medium amount of productivity which then results in medium amount of increase in the level of growth.
Since Brazil is a developing country, the best educational policy has increased the average level of education by a medium amount, which causes medium growth rate of the country.
c. Impact of education on economic growth of France
Since the level of average education in the developed country is very high, then the labor in the developed country has higher productivity. Therefore, the growth rate of the country is very high.
The best educational policy would promote smaller amount of increase in the average education. This, in turn, increases the small amount of productivity which results in small amount of increase in the level of growth.
Since France is a developed country, the best educational policy has increased the average level of education by a small amount, which then results in low growth rate of the country.