Scenario: Tree Country Has a Population of 18,000 People, of Whom

question 173

Multiple Choice

Scenario: Tree Country has a population of 18,000 people, of whom two-thirds are part of the workforce. The country's only asset is wood, where K = 18,000. The country only produces wooden furniture. In the figure below, Y stands for GDP, and H equals efficiency units of labor.

-Refer to the scenario above.Assume Tree Country's economy has constant returns to scale.If its population doubles and all other inputs remain the same,how would GDP change?

• A) GDP would stay the same.
• B) GDP would increase.
• C) GDP would increase by exactly 50 percent.
• D) GDP would decrease by exactly 50 percent.

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Definitions:

Capital Flight

The sudden and large-scale withdrawal of capital or assets from a country due to economic or political instability.

"Brain Drain"

The emigration of highly trained or qualified people from a particular country.

Aggregate Demand

A schedule or curve that shows the total quantity of goods and services that would be demanded (purchased) at various price levels.

World's Output

The total production of all goods and services across all countries in the world.