Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Question
Chapter 23, Problem 5TY
To determine
The shifts in production function due to capital formation and its impact on labor productivity.
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Why does an increase in the labor force cause the Market Productivity of Capital to increase?
Why does adding capital to a production function make the economy more productive? What are diminishing returns to capital? How does technology affect productivity and growth?
What is productivity? Describe the factors of productivity.
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Chapter 23 Solutions
Economics: Principles & Policy
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- Is capital a man - made productive resourcesarrow_forwardConsider the per-worker production function graph. If there is an increase in capital per hour worked, holding technology constant, then A. there is a movement from A to B. B. there is a movement from A to C. C. there is a movement from B to D. D. there is a movement from D to C. If there is an increase in technology, holding constant the quantity of capital per hour worked, then A. there is a movement from C to D. B. there is a movement from A to B. C. there is a movement from D to B. D. there is a movement from A to C. C Real GDP per hour worked (Y/L) 10- Y/L2 Y/L₁ Per-Worker Production Function C 3 B Per Worker Production Function 1 K/L₁ K/L₂ Capital per hour worked (K/L) 10arrow_forwardThe capital accumulation theory of economic growth that economies attain growth through saving invested in increasing the capital resources in the economy fails to take account of which of the following factors? a) For capital accumulation to produce economic growth it has to be the right type of capital that can be applied to the production of goods desired by society. b) The capital created has to be efficient. Savings may be squandered by producing capital goods that consume a lot of resources to produce, produce poor quality goods, or are wasteful of other resources. c) For capital to be productive there must be appropriate infrastructure including transportation and communication systems, banking and legal systems, as well as requisite natural resources and often appropriately skilled labor. d) Societies may still squander the wealth created by capital accumulation and in the long-run limit the growth of the economy. e) All of the abovearrow_forward
- Compare and contrast human capital, H, and physical capital, K. How is H different from labour, L?arrow_forwardAn increase in labor productivity means businesses will produce more output with the same amount of labor. Explainarrow_forwardThe aggregate production function is y=3KL. If they are 30 units of capital and 40 units of labor, what is aggregate output? What is labor productivity? What is capital productivity?arrow_forward
- Which one is true? labor productivity will be higher when the capital stock is larger and the rate of change in labor productivity remains the same as capital stock goes up. labor productivity will be higher when the capital stock is larger and the rate of change in labor productivity increases as capital stock goes up. labor productivity will be lower when the capital stock is larger and the rate of change in labor productivity remains the same as capital stock goes up. labor productivity will be higher when the capital stock per worker is larger but the rate of change in labor productivity will eventually decrease as capital stock per worker goes up.arrow_forwardWhich of the following is an example of capital as a factor of production? Group of answer choices Stocks Bonds money Equipment used by businessesarrow_forwardShow graphically on the same x and y axis what happens to this production function if there is a technological advancement in this economy. Don,t copy from anywhere.arrow_forward
- 3. The following information has been discovered about the economy of Errachidia. The country's productivity curve is Capital Real GDP 10 3.8 20 5.7 30 7.13 40 8.31 50 9.35 60 10.29 70 11.14 80 11.94 1) Draw the production function for Ertachidia 2) Explain the reason for the shape of the graph Ac Accarrow_forwardBased in info and your answer in question 1 what is capital productivityarrow_forward2.4 Economic growth in the long run. Another theory explaining economic growth is the Endogenous Growth Theory. Suppose a country having the following parameters: Production function: Y = AK Saving rate: 5 Depreciation rate of capital: & What is the condition for economic growth. according to this theory?arrow_forward
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