4. The catch-up effect Consider the economies of Sporon and Tralfamadore, both o
ID: 1111180 • Letter: 4
Question
4. The catch-up effect Consider the economies of Sporon and Tralfamadore, both of which produce glops of gloop using only tools and workers. Suppose that, during the course of 50 years, the level of physical capital per worker rises by 5 tools per worker in each economy, but the size of each labor force remains the same Complete the following tables by entering productivity (in terms of output per worker) for each economy in 2019 and 2069. Sporon Output (Glops of gloop) 1,800 2,160 Physical Capital (Tools per worker) Productivity (Glops per worker) Labor Fo Year 2019 2069 (Workers) 30 30 16 Tralfamadore output (Glops of gloop) Productivity (Glops per worker) Physical Capita Labor Force Year 2019 2069 (Tools per worker) 8 13 (Workers) 30 30 900 1,620 Initially, the number of tools per worker was higher in Sporon than in Tralfamadore. From 2019 to 2069, capital per worker rises by 5 units in each country. The 5-unit change in capital per worker causes productivity in Sporon to rise by a This illustrates the amount than productivity in Tralfamadore effect.Explanation / Answer
Year
Physical Capital
Labor Force
Output
Productivity
2019
11
30
1800
1800/30=60
2069
16
30
2160
2160/30=72
Productivity – Output/Labor Force
Year
Physical Capital
Labor Force
Output
Productivity
2019
8
30
900
900/30=30
2069
13
30
1620
1620/30=54
Initially, the number of tools per worker was higher in Sporon than in Tralfamadore. From 2019 to 2069, capital per worker rises by 5 units in each country. The 5unit change in capital per worker causes productivity in Sporon to rise by a smaller amount than productivity in Tralfamadore.. This illustrates the concept of diminishing returns ,
Year
Physical Capital
Labor Force
Output
Productivity
2019
11
30
1800
1800/30=60
2069
16
30
2160
2160/30=72
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