1. In 1973 the UK was at full employment, 47 billion hours of labour produced real GDP of L550 billion, and the real wage rate was L7. 12 hour.  Between 1973 and 2003, capital per worker increased and technology advanced.  At the same time, the population increased, but higher income taxes and more generous unemployment benefits decreased the supply of labour.  In 2003, the full employment quantity of labour was the same as in 1973, but the real wage rate was L12.30 and hour and real GDP was L1, 034 billion.

a. Draw a graph of the UK labour market that shows the demand for labour, the supply of labour, and the real wage rate in 1973 and 2003.

b. Draw a graph of the UK production function in 1973 and 2003.  Make sure your graph shows potential GDP in both years.

2. Japan's real GDP was 515 trillion yen in 2003 and 529 trillion yen in 2004.  Japan's population was 127.7 million in 2003 and 127.9 million in 2004.  Calculate:

a. Japan's economic growth rate in 2004

b. The growth rate of real GDP per person in 2004

c. The approximate number of years it takes for real GDP per person in Japan to double if the 2004 economic growth rate and population growth rate are maintained.