[Joseph_E._Stiglitz,_Carl_E._Walsh]_Economics(Bookos.org) (1)

2. Explain why a rapid influx of workers might result in a
lower output per worker (a reduction in productivity).
Would the effect on productivity depend on the skill
level of the new workers?
3. Explain, using supply and demand diagrams, how a
technological change such as computerization could
lead to lower wages for unskilled workers and higher
wages for skilled workers.
4. Using the model of Chapter 26, discuss the effect on
the level of investment for an open economy of (a) an
increased government deficit; (b) an increase in government
expenditure, financed by taxes on households
that reduce their disposable income; (c) an investment
tax credit. How will such policies affect future living
standards of those living in the country?
5. Calculate the growth rate in the number of hours
worked per capita, total output, and output per capita
from the following information:
Growth rate in number of hours worked
Growth rate of the population
Growth rate of productivity
= 1.5 percent
= 1.2 percent
= 2.3 percent
What happens to the growth rates of total output and
per capita output if the growth rate of productivity rises
to 3.3 percent? What happens to the growth rates of
total output and per capita output if the growth rate of
the population rises to 2.0 percent?
6. The table below gives growth rates for the United
States for various time periods. Using these data, calculate
the growth rate of average hours worked per
capita for each period.
1970– 1980– 1990– 2000–
1979 1989 1999 2002
Output 3.67% 3.12% 3.38% 2.27%
Output per capita 1.12% 1.31% 2.05% 2.26%
Productivity 1.92% 1.38% 1.82% 3.43%
Total hours 1.75% 1.74% 1.56% –1.17%
7. Assume investments in human capital yield a return of
15 percent, private investments yield a total return of
10 percent, and public investments in research yield a
return of 25 percent. Assume the deficit is $100 billion
per year, and the government wishes to eliminate it.
What will be the impact on economic growth of a
deficit reduction package that consists of reducing
Medicare expenditures by $50 billion, education expenditures
by $40 billion, and research expenditures by
$10 billion?
REVIEW AND PRACTICE ∂ 603