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Economic growth - Math Problem Example

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For a country or a particular area to develop, it is important to ensure that the product parameter is always positive and thus the reason why it has to be above zero at all times. Having a negative product parameter leads to a negative result that is not the goal of any…

Extract of sample "Economic growth"

Economic Growth 4(a) Y = Output per worker K = Physical capital per worker A>0 =Product parameter is constant Y = AK^0.5 Considering the level of capital that is the golden rule, then y = n + δ. Given parameter values and the capital per person the result is:
y= (1/2) K^1/2 = (1/2) * 4^1/2 = 0.25 > n + δ = 10
For a country or a particular area to develop, it is important to ensure that the product parameter is always positive and thus the reason why it has to be above zero at all times. Having a negative product parameter leads to a negative result that is not the goal of any country. Physical capital is vital for any organization for it shows the amount that the person ventured into the business bearing. This capital is later subtracted from the total income generated by an organization and this leads to the formulation of the net income (Weil, 2013). Multiplying the product parameter by physical capital that each worker employs and then putting it by the power of 0.5 shows the output per worker. This is important for an organization gets to understand the weakest links in the organization and deals with them appropriately.
(b)
Country 1 (i=1)
Country 2 (i=2)
Provided I have all information, regarding the average output per worker and the physical capital per worker for each of the countries, it is possible to calculate the relative productivity of the country. Considering:
Y = Output per worker
K = Physical capital per worker
A>0 =Product parameter is constant
Y = AK^0.5
Then the best way to carry this out is by using reverse calculations where
Y = AK^0.5
0.5√Y = AK
0.5√Y/K = A
It is thus appropriate to state dividing the quarter root of the stated output per worker and dividing by physical capital per worker offers the relative productivity per worker for a each of the countries.
(c)
The differences in the levels of production in a particular country mainly depend on output per-worker in the various organizations in the country. There are different organizations that let their workers operate without following up on the attitudes expressed by employees while working. Employees that perform poorly under supervision are the main reason why the output per worker is usually low (Weil, 2013). The consequent of this is the entire country having a low Gross Domestic Product and thus low productivity levels in some countries. However, there are some countries that are strict with regard to the performance of the organizations and as expected the result of this is having hard working people, this raises the Gross Domestic Product. With a high GDP, the productivity levels are normally high. Government policies can lead to high productivity if for example they focus on the rights of workers and ensure that they receive fair treatment. This leads to workers with increased morale and consequently high productivity levels. Another example is having policies that seek to ensure that politicians do not interrupt economic processes and let the actual experts, economics, focus on these issues.

Bibliography
Weil, D. (2013). Economic growth. International Edition, 3rd edition. London: Pearson. Read More
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