1. A. Given that the per capita income of $600 in the poorest country, Australia’s per capita income in 2010 was $60,000, and Australia’s per capita income growth rate per annum = 2% we can assume that per capita income in Australia has been growing in 232.55 or about 233 years since 1777.

The calculation:

yt = y0 (1 + ḡ)t
$60,000 = $600 (1 + 0.02)t t = ln100/ln1.02 = 232.55

B. The growth rate of 2% was mismeasured, economists proposed new growth rate that equal to 3%. Based on this new rate, we can calculate Australia’s per capita income in 1850.
The calculation:
Yt = y0 (1 + ḡ)t
$60,000 = y0 (1 + 0.03)160 y1850 = $60,0000/113.22855 =$529.90

This figure of $529.90 is plausible, back in 1850 Australia’s per capita income was still above $300, hence Australians in 1850 still could live (buy necessities and living goods). Yet if we compare to the poorest country, this figure does not show a big gap in per capita income (where in poorest country, they do not have growth in per capita income or maybe little growth).

2. A. From the article “The Myth of Asia’s Miracle” written by Paul Krugman, the leading countries in Asia achieved a rapid growth in per capita income and GPD as the feedback of a rise in production input: capital, labour, and knowledge. Also in Japan they achieved the rapid growth by an increase in its efficiency of their input (noted by Ā). From this information, the model of production could be suggested as

Yt = F(Kt , Lt) = Ā Ktα Lt1-α

Kt+1 = It – đKt

This first model was suggested from Sollow growth model, utilising capital (Kt) and Labour force (Lt).Moreover, the capital accumulation process can be modelled as the second equation where the change in capital is the conclusion of the year capital investment deducted by the depreciation of the existing capital. To conclude the model with 2/3 in the share of