The People's Republic of China has an estimated $101.54 trillion of capital with a depreciation rate of 5.2% per year. If its GDP is $20.5 crillion and its saving rate is 45% would we expect China's GDP to be growing or shrinking? O growing, I> dK O growing, I< dK O shrinking, I> dK O shrinking, I< dK QUESTION 10 (continued) Based on the numbers in the previous problem economists have calculated that China's capital stock will increase by 3.89% to $105.48 trillion by the end of the year. Does that mean the GDP will also increase by 3.89%? You can use the production function to predict the change in GDP and compare. Use, Y = AKU.4L0.6, and to estimate China's final GDP (in trillions of $s) and then calculate the

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Chapter1: Making Economics Decisions
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The People's Republic of China has an estimated $101.54 trillion of capital with a deprecíiation rate of 5.2% per year. If its GDP is $20.5
trillion and its saving rate is 45% would we expect China's GDP to be growing or shrinking?
O growing, I> dK
O growing, I< dK
O shrinking, I > dK
shrinking, I< dK
QUESTION 10
(continued) Based on the numbers in the previous problem economists have calculated that China's capital stock will increase by 3.89% to
$105.48 trillion by the end of the year. Does that mean the GDP will also increase by 3.89%? You can use the production function to
predict the change in GDP and compare. Use ,Y = AKU.4L0.6, and to estimate China's final GDP (in trillions of $s) and then calculate the
percent change from its initial GDP of $20.5 tríllion.
China's GDP grows but not as fast as the capital stock
China's GDP grows at the same rate as its capital stock
China's GDP grows faster than its capital stock
O China's GDP doesn't grow, so none of the above
Transcribed Image Text:The People's Republic of China has an estimated $101.54 trillion of capital with a deprecíiation rate of 5.2% per year. If its GDP is $20.5 trillion and its saving rate is 45% would we expect China's GDP to be growing or shrinking? O growing, I> dK O growing, I< dK O shrinking, I > dK shrinking, I< dK QUESTION 10 (continued) Based on the numbers in the previous problem economists have calculated that China's capital stock will increase by 3.89% to $105.48 trillion by the end of the year. Does that mean the GDP will also increase by 3.89%? You can use the production function to predict the change in GDP and compare. Use ,Y = AKU.4L0.6, and to estimate China's final GDP (in trillions of $s) and then calculate the percent change from its initial GDP of $20.5 tríllion. China's GDP grows but not as fast as the capital stock China's GDP grows at the same rate as its capital stock China's GDP grows faster than its capital stock O China's GDP doesn't grow, so none of the above
Expert Solution
Step 1

The contribution of capital is 0.4 and it would affect the GDP accordingly. The rise in capital stock is positive, thus we can conclude that GDP would definitely rise.

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