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Homework Example

This document explores the concept of simple ratios in comparative economics, focusing on Column 3 (kA/kUS = 0.2589) and Column 4 (yA/yUS = 0.3561). It assumes a constant A value of 1 for simplification, which aligns output metrics between the US and another country. The text details how to calculate predicted output per person, comparing actual output with predicted output ratios. Key calculations include the relationship between outputs, demonstrating the relative productivity measured through these simple ratios, leading to significant economic insights.

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Homework Example

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  1. Homework Example

  2. Column 3 and 4 • Simple Ratios: • Column 3: kA/kUS $35,185/$135,877 = .2589 • Column 4: yA/yUS $15,275/$42,887 = .3561

  3. Column 5 • Assume A= 1 for simplicity • A can equal anything as long as it is the same for both the US and the other country, but using A=1 is necessary for later. • yUS*=(1)kUS1/3 • $51.41=$135,8771/3 • yA*=(1)kA1/3 • $32.76=$35,1681/3 • Relative: • yA*/yUS* = $32.76/51.51=.637

  4. Column 6 • y = actual output per person (column 2) • y* = predicted output per person (y*=k1/3) • y = Ay* • y/y* = A • Yus/yus*= 42,887/51.41 = 834.21 • yA/yA*= 15,275/32.767 = 466.166 • Relative: • AA/AUS= 466.166/834.21 = 0.559

  5. Final Answer

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