Question

Consider the economies of Hermes and Gobbledigook, 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 2012 and 2062.

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 _______________

Answer 1

The five unit increase led to increase in Hermes productivity by a smaller amount than Gobbledigook.

For Hermes 2012

Labour force = 30

Output = 1800

Productivity = 1800/30

= 60

2062

Labor force = 30

Output = 2160

productivity = 2160/30

= 72

For Gobbledigook 2012

Labour force = 30

Output =900

Productivity = 900/30

= 30

For 2062

Labour force = 30

Output = 1800

Productivity = 1620/30

= 54

This illustrates the catch up effect

At first the tools per worker was more in Hermes. But down the years the capital by worker rose for each of the countries by 5 units.

The five unit increase led to increase in Hermes productivity by a smaller amount than Gobbledigook.

What is the catch up effect

This is the belief in economics that all countries eventually come to a point of convergence.

• According to the theory the underdeveloped nations try to catch up with the developed ones by growing more rapidly.

Read more on the catch up effect here: https://brainly.com/question/15061995