A Small Country's Aggregate Production Function Per Hour of Labor

question 71

Multiple Choice

A small country's aggregate production function per hour of labor is given by Y = K1/2. Its depreciation rate is 5 percent and its investment rate is 25 percent. What is its steady-state level of real GDP?

• A) 25
• B) 5
• C) 1.25
• D) You need to know the steady-state level of capital stock to answer this question.

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Definitions:

Annual Dividends

The total amount of dividend payments made to shareholders over a year.

Market Value

Market value is the current price at which an asset or service can be bought or sold in an open market.

Retained Earnings

The portion of net income left over for a business after it has paid out dividends to its shareholders, often reinvested into the business.

Cumulative Net Income

The total profit of a company after all expenses and taxes have been deducted, accumulated over a period of time.