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    Business Cycles and Growth

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    1. If tax revenues equal $100 billion, government spending equals $130 billion, and the government borrows $25 billion, how much do you expect the money supply to increase given the government constraint?

    2. Suppose labor's share of GDP is 70 percent and capital's is 30 percent, real GDP is growing at a rate of 4 percent a year, the labor force is growing at 2 percent, and the capital stock is growing at 3 percent. What is the growth rate of total factor productivity?

    14. What is the growth rate for an economy in which TFP grows at a rate of 3 percent per year, the size of the labor force is unchanged, the capital stock grows at a rate of 2 percent per year, and labor and capital each account for 50 percent of output?

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    Solution Preview

    Answer:
    1. If tax revenues equal $100 billion, government spending equals $130 billion, and the government borrows $25 billion, how much do you expect the money supply to increase given the government constraint?

    As we know that,
    As per the government constraint:
    ...

    Solution Summary

    What is the growth rate of total factor productivity are determined.

    $2.19