In the 1950s, China had a very rapid population growth rate, which it was able to reduce dramatically over the next half century. Over the past two decades, China has experienced rapid growth in both technology and the capital stock.
a. Draw a graph of China’s aggregate production function. Put labor on the horizontal axis. Show why a rapid increase in population did not result in a rapid increase in real GDP.
b. Show how moderate population growth combined with increases in technology and the capital stock would result in much faster real GDP growth. Explain why your results are different than in your answer to part a.