3. (Cobb-Douglas) As an economist working at the International Monetary Fund, yo

Question

3. (Cobb-Douglas) As an economist working at the International Monetary Fund, you are given the following data for Brazil: predicted per capita GDP, relative to the United States, as given by y = k1/3, is 0.56, and total factor productivity is 0.36. What is the observed per capita GDP, relative to the United States?

0.92

1.57

0.20

0.56

0.81

4. (Total Factor Productivity) What are the shortcomings of using the production model y = k1/3? What might we include in our model to improve the fit of this simple model?

Explanation / Answer

3. answer is 0.92

4. Production model in the equation is considering only capital stock, ignorning labor stock and total factor productivity which is the biggest shortcomings of the using y = k 1/3

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