ECON 560 Midterm: ECON560 Midterm 1 Spring 2014 solution
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Instructions: this is closed book, closed notes exam, no calculators of any kind are allowed, show all the calculations, if you need more space, use the back of the page, fully label all graphs. 1(0 t g: prove that ln( ty is a linear function of time. Indicate the intercept and slope of the linear function. Which is a linear function of t, with intercept ln( yt ln( y t ln( 0y. 1ln( g : explain how you can see the growth rate of the original variable ty , from looking at the graph of its natural logarithm, provided that the constant growth rate g is small. In your explanation state the mathematical theorem you rely on. , which implies that for small g we have g . Thus, the growth rate of the original variable ty is approximated by the ln( ty .
