Suppose the Country of Prescott Has the Production Function Y $$\begin{array} { c c c c } \text { Year } & Y & K & N \\\hline 2002 & 2000 & 1700 & 70 \\2003 & 2100 & 1785 & 75\end{array}$$

question 90

Essay

Suppose the country of Prescott has the production function Y = AK^0.25N^0.75. The following table shows Prescott's macroeconomic data for 2002 and 2003: $$\begin{array} { c c c c } \text { Year } & Y & K & N \\\hline 2002 & 2000 & 1700 & 70 \\2003 & 2100 & 1785 & 75\end{array}$$ a. By how much did productivity grow between 2002 and 2003?
b. If productivity remains constant from 2003 to 2004 and the labour force increases from 75 to 80, how large will the capital stock need to be to produce output of 2200 in 2004?

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Definitions:

Declare Dividends

Declare dividends refers to the action by a company's board of directors to distribute a portion of the earnings to shareholders, typically in the form of cash or stock.

Execute Policy

The act of implementing or carrying out a set of directives or procedures laid down by an organization or government.

Obtain Capital

The act of securing funds or resources to finance business operations, typically through borrowing, equity investment, or earnings.

Limited Liability

A legal structure that limits the financial responsibility of owners or shareholders to the amount they invested in the business, protecting personal assets from company debts and liabilities.