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I don't understand any of this and his explanation makes no sense to me! Help please? Thanks in Advance! Part I. Cobb-Douglas Production Function Suppose
I don't understand any of this and his explanation makes no sense to me! Help please? Thanks in Advance!
Part I. Cobb-Douglas Production Function Suppose that an economy's production function is Cobb-Douglas with parameter a = 0.3. Here we have Y = A - Ka . Ll-a. a. What fractions of income do capital and labor receive? b. Suppose that immigration increases the labor force by 15 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? Part II. Loanable Fund Model The government raises taxes by $100 billion. If the marginal propensity to consume is 0.6, what happens to the following? Do they rise or fall? By what amounts? a. Public saving b. Private saving c. National saving d. Investment Part III. GDP Application Consider whether each of the following events is likely to increase or decrease real GDP. In each case, do you think the well-being of the average person in society most likely changes in the same direction as real GDP? Why or why not? a. A hurricane in Florida forces Disney World to shut down for a month. b. The discovery of a new, easy-to-grow strain of wheat increases farm harvests. c. Increased hostility between unions and management sparks a rash of strikes. d. Firms throughout the economy experience falling demand, causing them to lay off workersStep by Step Solution
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