The Next Questions Refer to the Following

question 5

Multiple Choice

The next questions refer to the following.
Suppose the economy has TFP = 10, there are 400 hours worked, and 60 unit of capital and 210 units of land the Cobb-Douglas production function is:
Output = TFP x Hours^0.3 x Capital^0.3 x Land^0.2.
-In this economy,approximately how fast would the capital stock need to grow to produce growth of 1% per annum?

• A) 1% per annum
• B) 2.5% per annum
• C) 3.3% per annum
• D) 4.8% per annum
• E) 5.2% per annum

---

Definitions:

Utility Function

A mathematical representation used in economics to model satisfaction or preference that a consumer derives from the consumption of goods and services.

Risk Averse

A behavioral tendency to prefer avoiding losses over acquiring equivalent gains.

Present Value

The worth at present of an anticipated future cash amount or stream of payments, considering a particular rate of return.

Interest Rates

The cost of borrowing money, typically expressed as a percentage of the amount borrowed, charged by lenders to borrowers for the use of their funds.