Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 17, Problem 5WNG
To determine
Movements of rise in labor along the production function and thereby change in the Long Run
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Using the production function Real GDP = T (L, K), define the term production function and describe what each of the variables (T, L, and K) represents. When graphed with Real GDP on the vertical axis and labor on the horizontal axis, which variable(s) can shift the production function and which variable(s) can cause a movement along the production function?
An article in the Wall Street Journal observes: “For 2008, productivity grew an astounding 2.8% from 2007 even as the economy suffered through its worst recession in decades.” How is it possible for labor productivity to increase if output is falling?
In macroeconomics, the connection from inputs to outputs for the entire economy is called _______________.
Question options:
a) physical capital
b) a production function
c) human capital
d) an aggregate production function
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- Classify each of the following as a movement along or a shift of the production function and provide a justification for your choice. (1)An increase in the number of machines used in production (2) An increase in the population growth rate (3) A new technological innovationarrow_forwardSuppose you are given the aggregate production function for an economy and the amount of available technology increases for this economy. If labor and capital constant are held constant, increase in technology will causes labor productivity to decrease. True Falsearrow_forwardRefer to the graph shown below. At point A: Which is true? A: the economy has full employment B: economic growth is declining C: inflation tends to be declining D: wages can be lowered due to worker surplusarrow_forward
- The following graph shows a variety of possible production functions (PFs) in an imaginary economy, assuming constant levels of human capital and technology. Because human capital and technology remain unchanged, each of these production functions represents a different level of the capital stock. Fill in the table with the curve that corresponds to each of the capital stock levels described. Levels of Capital Stock This corresponds to which curve? (PF1, PF2, PF3) Highest Middle Lowest Fill in the blank: The slope of the line connecting the origin to point B is __________ (options: flatter, steeper) than the slope of the line connecting the origin to point A, because the slope of such a line is equivalent to ___________ (options: productivity, the marginal physical product of labor, marginal cost).arrow_forwardShow graphically and explain how a rise in labor productivity affects the real wage rate.arrow_forwardShow graphically on the same x and y axis what happens to this production function if there is a technological advancement in this economy. Don,t copy from anywhere.arrow_forward
- Farmland is a developing country with the following production function:Y = 24L2/3K1/3with Y = Output levelL = Quantity of laborK = Quantity of machinesa. Find the real rate of return for labor. Show your calculation. b. Suppose Farmland is granted some extra machines for production.How would this affect the real rate of return for labor? Explain by using theresult in (a).arrow_forwardHow so gains in worker productivity lead to gains in per capita GDP? A. as workers produce, their wages will rise and they will have more disposable income for consumption, leading to a rise in GDP per Capita. B.The amount a worker can produce and that worker's income are exactly equal so that these numbers stay the same. C.The amount a worker can pproduce and that workers's income are not always exactly equal, so these numbers may differ. D. An aggregate production function describes the input of an entire economy based on various outputs such as capital, labor and technology.arrow_forwardAn increase in labor productivity means businesses will produce more output with the same amount of labor. Explainarrow_forward
- During the course of the twentieth century, the average workweek in the United States has gotten shorter and Americans have enjoyed greater amounts of leisure time. How has this development affected potential GDP and labor productivity?arrow_forwardIf we have an aggregate production function of the form Y = AK, at what capital-labor ratio can a steady-state equilibrium be reached?arrow_forwardCountry A and country B both have the production function Y = F(K, L) = K^0,5L^0,5 A. Does this production function have constant returns to scale? Explain. B. What is the per-worker production function, y = f(k)? C. Assume that neither country experiences population growth or technological progress and that 5 percent of capital depreciates each year. Assume further that country A saves 10 percent of output each year and country B saves 20 percent of output each year. Using your answer from part (b) and the steady-state condition that investment equals depreciation, find the steady-state level of capital per worker for each country. Theen find the steady-state levels of income per worker and consumption per worker. D. Suppose that both countries start off with a capital stock per worker of 2. What are the levels of income per worker and consumption per worker? Remembering that the change in the capital stock is investment less depreciation, use a calculator or a computer spreadsheet…arrow_forward
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