ECON201: Tutorial 1 2026_Macro 1_Session 1-4
Section A: Written Questions
1. What is the difference between economic growth, and the growth in GDP per capita?
2. Suppose a production function is defined as:
(𝟏)
𝒀 = 𝑨𝒇(𝑲, 𝑵)
Here 𝒀 denotes output, 𝑨 represents total factor productivity, 𝑲 is capital and 𝑵 is labour.
a. Express equation 1 in terms of the Cobb-Douglas production function with constant
returns to scale.
b. Using equation (1), derive the growth accounting equation.
c. Translate the y=Y/N and k = K/N into growth per capita terms.
∆𝒀
∆𝑵
∆𝑲
∆𝑨
d. Translate the growth accounting equation ( 𝒀 = (𝟏 − 𝜽) 𝑵 + 𝜽 𝑲 + 𝑨 ) into growth
accounting per capita terms
3. In a competitive market and given a Cobb Douglas of the form 𝑌=AKθ N1−θ
a. Derive the equation of the real wage rate.
b. Derive the equation of the real interest rate.
4. Suppose that output grows at 5% per annum and that the share of labour in total income is
0.80. If capital and labour grows at 5% and 5% respectively, what is the growth rate of
total factor productivity?
5. Draw a well labelled diagram to illustrate steady state in the neoclassical growth model
Section B: Multiple Choice Questions
1. The per-capita production function in the Solow model is _________. This shape implies
that:
A. Concave; output per worker eventually starts to decline as capital per worker increases
B. Convex; each additional unit of capital adds more to output than the previous unit
C. Convex; capital accumulation leads to constant increases in output per worker
D. concave; equal increases in capital per worker lead to progressively smaller increases in
output per worker
E. convex; output per worker is independent of capital per worker
2. In the Solow growth model, the investment requirement is given by _____ and this curve is
_____ .
A. (n+d)k ; linear.
B. sf(k); concave.
C. (n+d)k; concave
D. f(k); linear
E. sf(k); linear
3. Which of the following statements correctly explains both the shape of the savings
function sf(k) and the reason it takes that shape in the Solow growth model?
A. The savings function is linear because the savings rate is constant and independent of
output per worker
B. The savings function is concave because depreciation increases as capital per worker rises
C. The savings function has the same concave shape as the production function because
savings are a constant fraction of output per worker
D. The savings function has a different shape from the production function because only part
of output is saved
E. The savings function is concave because savings and investment are equal at the steady
state
4. Which of the following best describes the steady state in the neoclassical growth model?
A. Savings are maximised
B. Output per worker grows at the same rate as technology
C. Capital per worker grows at the population growth rate
D. Actual saving equals required investment
E. Consumption per worker is zero
5. In the Solow growth model, the steady-state growth rate is _____, and at the steady state
aggregate income grows _____ because ______________________________.
A. affected by the savings rate; faster than population growth; higher savings permanently
raise capital accumulation
B. unaffected by the savings rate; at the same rate as population growth; output per worker
and capital per worker are constant
C. affected by the savings rate; at the same rate as population growth; savings determine
long-run productivity growth
D. unaffected by the savings rate; at zero growth; diminishing returns eliminate aggregate
growth
E. affected by the savings rate; slower than population growth; depreciation dominates capital
accumulation