2. Output and Growth (a) Indicate whether the following statement is true, false, or uncertain and explain your answer using words, graphs and equations as appropriate. (i) If firm's production functions exhibit diminishing marginal product of both capital and labor, then an increase in capital will result in an increase in the marginal product of capital. (ii) If total factor productivity and the number of workers both rise, then real wages will be unchanged. (iii) In the Solow model with technological progress, if the efficiency of labor is increasing at rate g, then in steady state both the real wage and the real rental price of capital also grow at rate g.

2. Output and Growth (a) Indicate whether the following statement is true, false, or uncertain and explain your answer using words, graphs and equations as appropriate. (i) If firm's production functions exhibit diminishing marginal product of both capital and labor, then an increase in capital will result in an increase in the marginal product of capital. (ii) If total factor productivity and the number of workers both rise, then real wages will be unchanged. (iii) In the Solow model with technological progress, if the efficiency of labor is increasing at rate g, then in steady state both the real wage and the real rental price of capital also grow at rate g.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter20: Economic Growth

Section: Chapter Questions

Problem 12SCQ: Why dues productivity growth in high-income economies not slow down as it runs into diminishing...

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