Question#1: Based on the aggregate productionfunction: GDP = FT (L, K,H)
a. Imagine that the amount of capital K increases by 10% (from50 to 55 units) while labour and technology stay the same.How much does total GDP and GDP per worker changeby? (A specific percentage is not needed, just ‘more than’/ ‘less than’ 10%.)
b. Imagine that capital increases by 5 units again, from 55 to60. How big is the resulting change in GDP and GDP perworker compared to the change that occurred in part a?
c. What is the term (hint: law) used to describe therelationship between Kand GDP in parts a and b?
d. Based on your answers to parts a through c, is itpossible to have sustained economic growth due to capital increasesalone?
e. Now imagine that the amount of labour L and capitalK both increase by 10%. By how much do total GDPand GDP per worker change by?
f. What is the term used to describe thisrelationship?
g. What is required to have sustained increases inper-worker GDP (which, in turn, results in improvingliving standards)?
Question#2:
| 2013 | 2017 |
POPULATION | 621,700 | 624,700 |
LABOUR FORCE | 393,000 | 383,900 |
EMPLOYMENT | 353,900 | 352,900 |
UNEMPLOYMENT | 39,100 | 31,000 |
a. In 2017, the unemployment rate was 61.45% and 2014unemployment rate was 63.21%, Did employment go up or down duringthis period?
b. Based on your answer to question a, can theunemployment rate always provide an accurate sense of how thelabour market is performing? Explain.
