Use the Following to Answer Questions

question 205

Multiple Choice

Use the following to answer questions
Scenario: Capital
An economy initially has 200 units of physical capital per worker. Each year it increases the amount of physical capital by 10%. According to the aggregate production function for this economy, each 1% increase in physical capital per worker, holding human capital and technology constant, increases output per worker by 0.25%.
-(Scenario: Capital) Look at the scenario Capital. If there is no inflation and output per worker is initially $1,000, what does the estimated output per worker equal after one year?

• A) $1,250
• B) $2,500
• C) $1,225
• D) $1,025
• Answer Key

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Definitions:

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