# Consider two countries: F and P. In both countries the production function is CobbDouglas

ECN301-F20-Assignment 2: Consider two countries: F and P. In both countries the production function is CobbDouglas: Y = zK

1/3 N 2/3. The population growth rate is 0.1, physical capital depreciates at the rate of 0.1, and z = 1.

## Consider two countries: F and P. In both countries the production function is CobbDouglas

**ECN301-F20-Assignment 2**

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1. Consider two countries: F and P. In both countries the production function is CobbDouglas: Y = zK

1/3 N 2/3. The population growth rate is 0.1, physical capital depreciates at the rate of 0.1, and z = 1. In F the savings rate is sF = 0.2 and in P it is sP = 0.4.

a) Write the production function in terms of output per worker (Y/N). (5 marks)

b) Find the steady-state values of the capital-labor ratio (K/N) in both countries. (5 marks)

c) Find the steady-state values of output per worker (Y/N) in both countries. (5 marks)

d) In which country is consumption per worker higher in the steady-state? (5 marks)

e) In which country is the marginal product of labour higher in the steady-state? (5 marks)

2. a) Solve Problem 2 from Chapter 8 of the textbook. (10 marks)

b) Solve Problem 12 from Chapter 8 of the textbook. (10 marks)

3. a) Plot the Canadian unemployment rate from 1946 to 2019 as in Figure 6.1 of the textbook and discuss it. (10 marks)

b) Plot the Canadian participation rates from 1946 to 2019 as in Figures 6.3, and 6.4 of the textbook. Discuss each figure along and in relation to each other. (10 marks)

c) If you were to discuss on a roundtable panel the state of the Canadian labour market what would be your key arguments and why? (10 marks)

d) Suppose you observe a 1% fall in the Canadian unemployment rate.

How would you interpret this evidence? (5 marks)

4. a) Solve Problem 7 from Chapter 6 of the textbook. (14 marks)

b) Solve Problem 8 from Chapter 6 of the textbook. (6 marks)

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