Consider an economy that is perfectly open to the world capital market. Suppose that the world rental price of capital (rw) was 0.3, and then it triples. Given that the production function is y=3k^(1/2) 1)The initial level of DGP per worker, y, (when rw was 0.3) is equal to: 5.4 15 3.35 4.5   2)By what factor does the level of GDP per worker changes when rw triples? y’ = 2y y’= 0.33y y’ = 3.003y y’ = 0.5y   3)The new level of GDP per worker, y’, (when rw becomes 0.9) is equal to: 16.2 5 15 10

MACROECONOMICS
14th Edition
ISBN:9781337794985
Author:Baumol
Publisher:Baumol
Chapter7: Economic Growth: Theory And Policy
Section: Chapter Questions
Problem 3DQ
icon
Related questions
Question

Consider an economy that is perfectly open to the world capital market. Suppose that the world rental price of capital (rw) was 0.3, and then it triples. Given that the production function is y=3k^(1/2)

1)The initial level of DGP per worker, y, (when rw was 0.3) is equal to:

5.4

15

3.35

4.5

 

2)By what factor does the level of GDP per worker changes when rw triples?

y’ = 2y

y’= 0.33y

y’ = 3.003y

y’ = 0.5y

 

3)The new level of GDP per worker, y’, (when rw becomes 0.9) is equal to:

16.2

5

15

10

Expert Solution
steps

Step by step

Solved in 2 steps with 2 images

Blurred answer
Knowledge Booster
Trade Balance
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
MACROECONOMICS
MACROECONOMICS
Economics
ISBN:
9781337794985
Author:
Baumol
Publisher:
CENGAGE L
Economics For Today
Economics For Today
Economics
ISBN:
9781337613040
Author:
Tucker
Publisher:
Cengage Learning
Survey Of Economics
Survey Of Economics
Economics
ISBN:
9781337111522
Author:
Tucker, Irvin B.
Publisher:
Cengage,
Micro Economics For Today
Micro Economics For Today
Economics
ISBN:
9781337613064
Author:
Tucker, Irvin B.
Publisher:
Cengage,
MACROECONOMICS FOR TODAY
MACROECONOMICS FOR TODAY
Economics
ISBN:
9781337613057
Author:
Tucker
Publisher:
CENGAGE L