Assignment:
Problem 1
For the following problems use the modified Harrod-Domar Model to fill in the table:
|
Country
|
Savings Rate
from Profit(%)
|
Savings Rate from Wages(%)
|
Profit-to-Income Ratio
|
Capital-Output Ratio
|
Deprecation
Rate (%)
|
Growth Rate (%)
|
|
A
|
20
|
25
|
.20
|
2
|
5
|
|
|
B
|
30
|
20
|
|
2
|
5
|
1
|
|
C
|
20
|
|
.10
|
1
|
2
|
0
|
|
D
|
|
20
|
.20
|
4
|
2
|
4
|
|
E
|
10
|
10
|
.25
|
3
|
|
0
|
|
F
|
50
|
10
|
.25
|
|
4
|
2
|
|
G
|
25
|
20
|
|
3
|
2
|
6
|
|
H
|
20
|
30
|
.20
|
2
|
|
2
|
|
I
|
10
|
10
|
.25
|
3
|
1
|
|
|
J
|
|
20
|
.10
|
2
|
5
|
3
|
Problem 2:
Calculate the Foster-Greer-Throbecke (FGT) Index, for α = 0, 1, and 2, using $1000 as the poverty line, for the following income distributions:
|
|
Income
|
# of People
|
Income
|
# of People
|
Income
|
# of People
|
|
|
0
|
2
|
0
|
4
|
0
|
8
|
|
|
200
|
2
|
100
|
6
|
200
|
4
|
|
|
500
|
4
|
200
|
5
|
400
|
4
|
|
|
1000
|
6
|
400
|
4
|
600
|
2
|
|
|
5000
|
4
|
800
|
3
|
800
|
2
|
|
|
10000
|
1
|
1600
|
2
|
1500
|
4
|
|
|
50000
|
1
|
3200
|
1
|
100000
|
1
|
|
P0
|
|
|
|
|
P1
|
|
|
|
|
P2
|
|
|
|
Problem 3:
Net Present Value Calculation
|
Initial Investment
|
Discount
Rate
|
Net Benefit Year 1
|
Net Benefit
Year 2
|
New Benefit
Year 3
|
Present
Value
|
Is this a worthwhile investment?
|
|
100,000
|
.06
|
50,000
|
50,000
|
50,000
|
|
|
|
100,000
|
.12
|
50,000
|
50,000
|
50,000
|
|
|
|
100.000
|
.24
|
50,000
|
50,000
|
50,000
|
|
|
|
200,000
|
.06
|
80,000
|
80,000
|
80,000
|
|
|
|
200,000
|
.36
|
100,000
|
100,000
|
100,000
|
|
|
|
500,000
|
.36
|
200,000
|
350,000
|
500,000
|
|
|
|
500,000
|
.36
|
500,00
|
350,000
|
200,000
|
|
|
Questions:
Question 1
Discuss the likely impact on the economic development of North Korea if a peace agreement is signed, and they begin open trade with South Korea. Use the nomenclature, theories and evidence we have learned in class to support your arguments.
Question 2
It has been suggested that GDP is a poor measure for economic growth because pollution abatement would be included as valuable production, but the depletion and degradation of our natural resources is often excluded from the calculations. Discuss the impact on the environment of policymakers using our current measures of GDP. Suggest changes to such measurements that would provide better outcomes (and explain what you mean by a better outcome).
Question 3
Policymaking is dependent on the perception of costs and benefits as well as how much we discount the future in our calculations. Discuss whether an economy would be better off with a far-sighted totalitarian (I.e. a single decision maker overall economic activity) or with a democracy with people that can at least look a little bit into the future.
Question 4
a. What is an O-ring production function, and how does it impact the relationship between capital, labor and economic development
b. Discuss what is meant by self-discovery in the context of economic development. Give examples to support your answer.
Question 5
a. As average family size decreases we might expect parents to make greater investments, on average, in their children. Some psychologists suggest that as that investment grows parents will become more protective and discourage risk-taking behavior. Discuss and predict the likely outcomes if both are true. Make sure to use graphs and/or equations to elaborate your response.
b. Education involves developing the human mind to enable people to be both be more productive, as well as to more thoroughly enjoy what they have produced. Discuss how these two reinforce or negate each other in the context of societal economic growth. Make sure to use graphs and/or equations to elaborate your response.