a-0.7. The K will receive ppose that an economy\'s production function is Cobb-D

Question

a-0.7. The K will receive ppose that an economy's production function is Cobb-Douglas Y K wi rameter (a) 30% of total output. (b) 70% of output (c) 50% of output (d) The percentage depends on the economic situation Q7. For decreasing returns to scales, if both K and L increase 15%, then output will increase (a) Exactly 15%. (b) More than 15% (c) Less than 15% Q8. Which of the following is a flow variable? (a) Wealth (b) The number unemployed (c) Government debt (d) Income 09. The amount of capital in an economy is a and the amount of investment isa (a) flow; stock (b) stock; flow (c) final good; intermediate good (d) intermediate good; final good. prices. Q10. Real GDP means the value of goods and services is measured in (a) current (b) actual (c) constant (d) average Q11. IGDP (.measured in billions of current dollars) is $5465, consumption is $3657, investment is S741, and net exports are S1910, then government expenditures are (a) $2977 (b) $1910 (c) -$843 (d) $1067 reent and population grew by 2 percent, then real GDP per person grew by 012. If real GDP grew by 6 pe approximately percent. (a) 2 (b) 3 (c) 4 (d) 8

Explanation / Answer

6. b) 70% of output

7. c) Less than 15%

Decreasing returns to scale means when labor and capital both increased by a certain proportion then output will increase by less than percentage increase in Labor and capital.

When L and K increased by 15% but output increases by less than 15% then it is said to be decreasing returns to scale.

8. d) Income

Income is a flow variable as it is measured over a period of time. Wealth, government debt and the unemployed people are stock variable as they are measured at a point of time.

9. b) stock; flow

Amount of capital is stock variable while amount of investment is flow because investment is done during a period of time while capital is seen at a point of time.

10. c) constant

Nominal GDP is measured in current prices while real GDP is measured at constant prices.

11. Y = C + I + G + NX

5465 = 3657 + 741 + G + (-1910)

5465 - 3657 - 741 + 1910 = G

G = $ 2977

Answer is a) $ 2977

12. Real gdp per person = Real GDP/Population = 6/2 = 3%

Answer is b) 3

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