"Consider the simple production model studied in class, but with different exponents. Suppose that t production function is Cobb-Douglas. The exponent on capital is 0.1 and the exponent on labor is 0.9. T data for this economy is A=10, KO=300 and the initial population is LO-30. We will assume that everyone this country works so that population equals employment and per-person GDP equals per-worker GD Now suppose that the country receives foreign aid that is used to invest in infrastructure and elect vehicles. As a result, over the next few years, the economyos capital stock doubles to K1=600. Fortunatell no one is killed during the hurricane. In the Capital market the Demand will and the Supply will M As a result, the rental rate will Shift to the Right; Remain unaffected; Increase Shift to the Left; Remain unaffected; Fall Shift to the Left; Shift to the Right; Fall
"Consider the simple production model studied in class, but with different exponents. Suppose that t production function is Cobb-Douglas. The exponent on capital is 0.1 and the exponent on labor is 0.9. T data for this economy is A=10, KO=300 and the initial population is LO-30. We will assume that everyone this country works so that population equals employment and per-person GDP equals per-worker GD Now suppose that the country receives foreign aid that is used to invest in infrastructure and elect vehicles. As a result, over the next few years, the economyos capital stock doubles to K1=600. Fortunatell no one is killed during the hurricane. In the Capital market the Demand will and the Supply will M As a result, the rental rate will Shift to the Right; Remain unaffected; Increase Shift to the Left; Remain unaffected; Fall Shift to the Left; Shift to the Right; Fall
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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