6. Now let’s move onto another topic. Let’s say that G(y) = Ay½ and that y(G) = By with A = 100 and B = 1. What would be the level of income in this country? (12.5 points)


7. Now, say that the institutions view holds and that institutions improve. Specifically, the relevant constant grows (A or B) grows by 10%. What is the new value of y? (12.5 points)



8. Consider two countries which we’ll call X and Y. Say that (AX / AY) = 2 and that country X is 20 years ahead technologically of Y and that technology grows at 1.1% a year. What dominates the productivity differences – technology or institutions? (12.5 points)