Take an Economy Where in 2001 Real GDP Is 4861

question 74

Essay

Take an economy where in 2001 real GDP is 4861.4, the capital stock is 13,806.2 and employment is 118.4 (in millions of workers). In 2002 the numbers were: real GDP 4986.3, capital stock 14,040.8, employment 119.2. Suppose the production function in both years is Y = AK^0.25N0.75.
a. Calculate total factor productivity for 2001 and 2002.
b. How much did total factor productivity grow from 2001 to 2002?
c. Calculate the percent increase in real output between 2001 and 2002.
d. Suppose tax incentives had raised the capital stock in 2002, making it 10% higher, at 15,444.9. If employment didn't change, what would have been the percent increase in real output between 2001 and 2002?
e. Instead of the increase in the capital stock in part d, suppose employment was 10% higher in 2002, making it 131.1. With the capital stock fixed at 14,040.8, what would have been the increase in real output between 2001 and 2002?

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Definitions:

Behavioral Issues

Behavioral issues refer to patterns of behavior that are disruptive or inappropriate in specific settings, often impacting an individual's ability to function effectively in social or professional contexts.

Top Down Approach

A management strategy where decision-making starts from the higher levels of the organization and flows down to the lower levels.

Product Cost Systems

Systems used to accumulate and allocate costs involved in producing a product or offering a service, including direct materials, labor, and overhead.

Highly Profitable Products

Products that generate considerably higher profits compared to other products due to superior demand, premium pricing, or lower costs.