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Hi guys , i was solving these questions from way back in the past , and had some serious doubts and second thoughts about these questions. Please help me out .
Q1) Suppose that a closed economy has two classes - capitalists who earn all profits and workers who earn and consume all wages. Aggregate income is equal to aggregate wages plus profits. Suppose 'g' is the constant incremental capital output ratio , 'n' is the constant rate of growth in the labor force and 'q' is the number of capitalists in the economy . What is the rate of profit along a balanced growth path with full employment?
a) 1/g
b) g
c) n
d) n/(g q)
Q2) in an economy with unlimited supplies of labour the wage rate is fixed at 0.5 unit of consumption good per period.the economy has a stock of machines,each of which employs one unit of labour to produce either one unit of itself or one unit of consumption good.
a)what is the relative price of consumption good in terms of machine?
b)what is the rate of profit in the economy?
Q3) In an economy 1 machine together with 1 unit of labor produces ½ machine or 1 unit of wage good. If the wage rate is 0.5 wage goods, and if the machine lasts forever , what is the maximum rate of growth that the economy can experience assuming that all profits are invested.
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