Macroeconomics
21st Edition
ISBN: 9781259915673
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 8, Problem 6RQ
To determine
Change in cost of production as a result of increasing output.
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Suppose an economy begins in steady state. By what proportion does per capita GDP change in the long run in response to each of the following changes?
(a) The investment rate doubles
(b) the depreciation rate falls by 10%
(c) The productivity level rises by 10%
(d) an earthquake destroys 75% of the capital stock
(e) A more generous immigration policy leads the population to double.
Which one of the following is not a determinant of productivity?
A greater stock of labor.
More human capital per worker.
More physical capital per worker.
Technological advancement.
All of the answers are determinants of productivity.
1.Many countries, including Pakistan, import substantial amounts of goods and services from other countries. However, economists claim that a country can enjoy a high standard of living only if it can produce a large quantity of goods and services itself. Can you reconcile these two facts? (Maximum 100 words).
2.Given the production function Y= AF (L, K, H, N), explain the determinants of productivity. ( Maximum100 words).
3.Population growth has a variety of effects on productivity. Explain this statement and justify your answer. (Maximum 200 words).
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- To what extent have increases in U.S. real GDP resulted from more labor inputs? From higher labor productivity? Rearrange the following contributors to the growth of productivity in order of their quantitative importance: economies of scale, quantity of capital, improved resource allocation, education and training, technological advance.arrow_forwardMany countries, including Pakistan, import substantial amounts of goods and services from other countries. However, economists claim that a country can enjoy a high standard of living only if it can produce a large quantity of goods and services itself. Can you reconcile these two facts? (Maximum 100 words). Given the production function Y= AF (L, K, H, N), explain the determinants of productivity. ( Maximum100 words). Population growth has a variety of effects on productivity. Explain this statement and justify your answer. (Maximum 200 words).arrow_forwardQ)If the economy is in a steady state, then A. both consumption per worker and capital per worker are decreasing. B. both consumption per worker and capital per worker are constant. C. consumption per worker is decreasing but capital per worker is constant. D. consumption per worker is constant but capital per worker is decreasing.arrow_forward
- Suppose the GDP growth resulting from physical capital in an economy is 1%, and the growth resulting from human capital is 2%. If the annual growth rate of GDP is 5%, the growth resulting from technology equals: 1% 2% 3% 4%arrow_forwardAssume a hypothetical society that decides to reduce consumption (production of consumption goods) and increase investment (production of capital goods). How would this change affect economic growth? What groups in society would benefit from this change? What groups might be hurt?arrow_forwardWhat has been the average annual growth rate of U.S. real GDP per person over the 120 years from 1900 to 2020? In which decade, beginning with the 1960s, was the growth of potential GDP per person greatest and slowest? Over the 120 years from 1900 to 2020, the average annual growth rate of U.S. real GDP per person is enter your response here percent.arrow_forward
- Say an economy begins with an initial level of capital per worker, k0, that is above its steady state level of capital per worker, k*. All else equal, what will happen to output per worker and capital per worker?arrow_forwardProblem 2 Assume that total output is determined by the formula: Total Output = Number of Workers x Productivity (a) If the workforce is growing by 1 percent a year but productivity doesn’t improve, how fast can output increase? (b) If productivity increases by 3 percent and the number of workers increases by 1 percent a year, how fast will output grow?arrow_forwardPer capita GDP in the long run: Suppose an economy begins in steady state.By what proportion does per capita GDP change in the long run in responseto each of the following changes?(a) Te investment rate doubles.(b) Te depreciation rate falls by 10%.(c) Te productivity level rises by 10%.(d) An earthquake destroys 75% of the capital stock.(e) A more generous immigration policy leads the population to double.arrow_forward
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