4. Suppose that an economys production function is Cobb Douglas with parameter = 0.3. a. What...

4. Suppose that an economy’s production function is Cobb–

Douglas with parameter α = 0.3.

a. What fractions of income do capital and labor receive?

b. Suppose that immigration increases the labor force by 10 percent. What happens to total output (in percent)?

The rental price of capital? The real wage?

c. Suppose that a gift of capital from abroad raises the capital stock by 10 percent. What happens to total output

(in percent)? The rental price of capital? The real wage?

d. Suppose that a technological advance raises the value of the parameter A by 10 percent. What happens to total output (in percent)? The rental price of capital? The real wage?