The national income (Y) of a country has the form: Y = 0.48K0.4L0.3NX0.01 Where: K is capital, L is labor and NX is net exports. a) How will a 1% increase in labor affect income? Is there an opinion that reducing the labor rate by 2% can increase net exports by 15% while keeping income unchanged, is this true or false? b) Let NX's growth rate be 4%, K is 3%, L is 5%. Determine the growth rate of Y.
The national income (Y) of a country has the form: Y = 0.48K0.4L0.3NX0.01 Where: K is capital, L is labor and NX is net exports. a) How will a 1% increase in labor affect income? Is there an opinion that reducing the labor rate by 2% can increase net exports by 15% while keeping income unchanged, is this true or false? b) Let NX's growth rate be 4%, K is 3%, L is 5%. Determine the growth rate of Y.
Chapter19: The Keynesian Model In Action
Section: Chapter Questions
Problem 2SQP
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Where: K is capital, L is labor and NX is net exports.
a) How will a 1% increase in labor affect income? Is there an opinion that reducing the labor rate by 2% can increase net exports by 15% while keeping income unchanged, is this true or false?
b) Let NX's growth rate be 4%, K is 3%, L is 5%. Determine the growth rate of Y.
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