Current labor hours worked is 50,000 per year. The capital stock is $100,000. Total factor productivity is 2.
a. If the production function is Y = A K1/3L2/3, what is real GDP?
b. If the labor force increases to 100,000, what will happen to real GDP?
c. If total factor productivity doubles, what will happen to real GDP?
d. Graph the production function, with capital on the horizontal axis, and use your graph to explain the difference between a doubling of the labor force and a doubling of total factor productivity