Question

Consider the economies of Hermes and Tralfamadore, both of which produce gobs of goo using only tools and workers. Suppose that, during the course of 10 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 2016 and 2026.
Hermes
Year Physical Capital (Tools per worker) Labor Force (Workers) Output (Glops of gloop) Productivity (Glops per worker)
2012 11 30 1,800 _______________
2062 16 30 2,160 _______________

Gobbledigook
Year Physical Capital (Tools per worker) Labor Force (Workers) Output (Glops of gloop) Productivity (Glops per worker)
2012 8 30 900 _______________
2062 13 30 1,620 _______________

Initially, the number of tools per worker was higher in Hermes than in Gobbledigook. From 2012 to 2062, capital per worker rises by 5 units in each country. The 5-unit change in capital per worker causes productivity in Hermes to rise by a _____ amount than productivity in Gobblegook. The illustrates the concept of _____, which makes it _____ for countries with low output to catch up to those with higher output.

Answer 1

1. The productivity (in terms of output per worker) in 2016 and 2026 for the economies of Hermes (60 and 72) and Tralfamadore (30 and 54).

2. The 5-unit change in capital per worker causes productivity in Tralfamadore to rise by 80% than productivity in Hermes which rose by 20%.

3. This illustrates the concept of the catch-up effect, which makes it possible for countries with low output to catch up to those with higher output.

What is the concept of the catch-up effect?

The economic concept of the catch-up effect states that developing countries usually develop faster than developed countries, eventually reach the same level of per capita productivity as developed economies.

Data and Calculations:

Hermes

Year      Physical Capital    Labor Force (Workers)   Output       Productivity

           (Tools per worker)                                  (Glops of gloop) (Glops per

                                                                                                         worker)

2016                 11                            30                         1,800       60 (1,800/30)

2026               16                            30                         2,160       72 (2,160/30)

Tralfamadore

Year      Physical Capital    Labor Force (Workers)   Output       Productivity

           (Tools per worker)                                  (Glops of gloop) (Glops per

                                                                                                         worker)

2016                 8                            30                         900       30 (900/30)

2026               13                            30                      1,620       54 (1,620/30)

Rise in productivity:

Hermes = 20% (72 - 60/60 x 100)

Tralfamadore = 80% (54 - 30)/30 x 100)

Thus, the productivity (in terms of output per worker) in 2016 and 2026 for the economies of Hermes (60 and 72) and Tralfamadore (30 and 54).

Learn more about the concept of catch-up effect at brainly.com/question/15061995