# Suppose that Mexico in 2000 was on its balanced-growth path. Output per worker in Mexico in the year 2000 was about \$10,000 per year. Labor-force growth was 2.5 percent per year. The depreciation rate was 3 percent per year. The rate of growth of the efficiency of labor was 2.5 percent per year. The saving rate was 16 percent of GDP. The diminishing-returns-to-investment parameter á is 0.5 A. What is Mexico’s equilibrium capital-output ratio? What was the value of efficiency in 2000? B. What is your forecast of output per worker in Mexico for 2040? C. Suppose instead the labor-force growth rate fell to 1 percent per year in 2000 and remained at 1 percent. What is your new forecast of output per worker in Mexico for 2040? D. In words, not equations, explain why your forecasted level of the standard of living changed as a result of the lower labor-force growth rate.

Suppose that Mexico in 2000 was on its balanced-growth path. Output per worker in Mexico in the year 2000 was about \$10,000 per year. Labor-force growth was 2.5 percent per year. The depreciation rate was 3 percent per year. The rate of growth of the efficiency of labor was 2.5 percent per year. The saving rate was 16 percent of GDP. The diminishing-returns-to-investment parameter á is 0.5
A. What is Mexico’s equilibrium capital-output ratio? What was the value of efficiency in 2000?
B. What is your forecast of output per worker in Mexico for 2040?
C. Suppose instead the labor-force growth rate fell to 1 percent per year in 2000 and remained at 1 percent. What is your new forecast of output per worker in Mexico for 2040?
D. In words, not equations, explain why your forecasted level of the standard of living changed as a result of the lower labor-force growth rate.

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