Suppose That the Production Function for the Economy Is: Y

question 27

Multiple Choice

Suppose that the production function for the economy is: Y = AK¹/⁴ᴸ³/⁴.Assume that real GDP is $8000 billion,capital stock is $32 000 billion,and the labour supply is 120 million (or 0.120 billion) workers.An increase in the capital stock of $1 billion will increase real GDP by

• A) $0.03125 billion.
• B) $0.0625 billion.
• C) $0.25 billion.
• D) $1 billion.

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Definitions:

Percentage Increase

A measure of the degree to which a quantity has grown over a period, expressed as a fraction of the starting value.

Sales

Transactions between a buyer and a seller involving the exchange of goods, services, or property for money.

Financial Ratios

Quantitative measures derived from financial statements to assess a company's performance, financial health, and operational efficiency.

Generally Accepted Accounting Principles

The framework of guidelines for financial accounting that includes details on how accounting transactions should be reported.