Production Function Real GDP = T (L,K),such That Real GDP = T(L

question 17

Multiple Choice

Production Function
Real GDP = T (L,K) ,such that Real GDP = T(L + K)
Assume that the technology coefficient is equal to 0.40.
-Refer to Exhibit 17-1.If there are 4 units of capital and 6 units of labor,________ units of output (Real GDP) will be produced.

• A) 10
• B) 5
• C) 4
• D) 20

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Definitions:

Real Rate

The interest rate adjusted for inflation, reflecting the true cost of borrowing or real yield on an investment.

Inflation Rate

The rate at which the general level of prices for goods and services is rising, and, subsequently, eroding purchasing power.

Spot Rate

The current market price at which a particular currency can be bought or sold for immediate delivery.

Relative PPP

Relative Purchasing Power Parity, a theory which states that exchange rates between currencies change to compensate for inflation rate differences among countries.