1. Assume that a country\'s production function changes from Y = K1/2 to Y = 2*K

Question

1. Assume that a country's production function changes from Y = K1/2 to Y = 2*K1/2. Which of the following could explain the change in this production function?

3. Using the same information as in problem #2, if the technological parameter increases from A=1 to A=2, the steady state level of output will

A. more than double.

B.less than double.
C.exactly double.
D. Impossible to tell.

4. After purchasing a zero-coupon bond for $945 (its face value is $1,000), news arrives that interest rates on savings accounts at banks have risen to 7 percent. What will happen to the price of this bond?

A. + $10.42.

B.- $10.42.

C.- $66.12.
D.+ 66.12

5. Stock market bubbles have real effects in the economy because:

A. overvalued stocks cause inflationary effects in the economy.

Explanation / Answer

1.B.

2.A.

3.C.

4.B.

5.D.

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