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The production function in each of Freedonia and Transylvania is Y=A (K) (L) 2/3 Freedonia is the wealthier of the two and has per

The production function in each of Freedonia and Transylvania is Y=A (K) (L) 2/3 Freedonia is the wealthier  

The production function in each of Freedonia and Transylvania is Y=A (K) (L) 2/3 Freedonia is the wealthier of the two and has per capita output 16x that of Transylvania. [15] Suppose Freedonia has a capital/labor ratio 27 times that of Transylvania. If this were the only difference in the two countries how much wealthier would Freedonia be relative to Transylvania? [16] What can one conclude from the exercise in [15]? [17] Some growth accounting: Output in Freedonia is determined by the production function Y=A(K)/2(L)/2. From 2005 to 2010 the Freedonian capital stock grew by 1%, total hours worked fell by 1%, and total factor productivity grew by 3%. As a result, total output over this period grew by %. Show your work.

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