Exam 6: Aggregate Incomes

Aquaria is a small island country that specializes in the production of yachts.It has a Cobb-Douglas aggregate production function. a)How will the production of yachts be affected if the technology used in the production of yachts in Aquaria improves? b)How will Aquaria's output be affected if both the efficiency units of labor and the physical capital stock increase by 12.5 percent,but the level of technology remains unchanged?

Scenario: Red Country and Purple Country have identical aggregate production functions. The amount of physical capital stock available to each country is equal. Labor supply in Red Country is HR, while the labor supply in Purple Country is HP. -Refer to the scenario above.Which of the following statements is a consequence of both countries' aggregate production function being identical?

If the income per capita in United Kingdom is £23,800 and the dollar per pound exchange rate is 1.68 in 2014,then income per capita in the United Kingdom in U.S.dollars in the same year is ________.

Scenario: The price of a given basket of goods in Country 1 is 10 karls. The price of the same basket of goods in Country 2 is 25 ritz and is $2 in the United States. Country 1 has an income per capita of 3,200 karls, and Country 2 has an income per capita of 5,500 ritz. -Refer to the scenario above.A basket of goods worth $1 in the United States has a price of ________ in Country 2.

The aggregate production function of Ritland is Y = A × K⁰.³ × H⁰.⁷,where Y denotes total output,A denotes the level of technology,K denotes the physical capital stock,and H denotes the efficiency units of production.The total output produced in Ritland in a certain year was worth $135,000.The technology used in the country improved over the next 10 years,while the physical capital stock and the efficiency units of labor remained approximately the same.Which of the following is likely to be true in this case?

Which of the following is true?

Which of the following is likely to lead to an increase in the GDP of a country?

The total efficiency units of labor in a country is 6,000.If the average efficiency of each worker in the economy doubles,the efficiency units of labor in the country will be ________,everything else remaining unchanged.

Argonia is currently producing Q amount of output using H efficiency units of labor,as shown in the following figure. Several workers in Argonia died during a year due to an epidemic.How will this affect output in the next year if all the other variables remained constant over the year? Explain with a suitable diagram.

Scenario: Tree Country has a population of 18,000 people, of whom two-thirds are part of the workforce. The country's only asset is wood, where K = 18,000. The country only produces wooden furniture. In the figure below, Y stands for GDP, and H equals efficiency units of labor. -Refer to the scenario above.Tree Country's GDP likely will increase if ________.

The short-run aggregate production function is subject to ________ if capital stock is increased,holding the total efficiency units of labor constant.

Scenario: In Riverland, life expectancy is rising and has just surpassed life expectancy in its neighbor country, Lakeland. -Refer to the scenario above.As life expectancy is rising further in Riverland,its Human Development Index likely will ________.

Scenario: Tree Country has a population of 18,000 people, of whom two-thirds are part of the workforce. The country's only asset is wood, where K = 18,000. The country only produces wooden furniture. In the figure below, Y stands for GDP, and H equals efficiency units of labor. -Refer to the scenario above.Assume Tree Country's economy has constant returns to scale.If its population doubles and all other inputs remain the same,how would GDP change?

Scenario: Two neighboring countries, Sweetland and Sourland, are identical in terms of size, population (800,000), education of workforce, and value of natural resources owned. -Refer to the scenario above.Assume Sweetland has a higher GDP than does Sourland.Which of the following inputs in production might be greater in Sweetland?

The following figure shows the total output that an economy can produce using varying amounts of capital. -Refer to the figure above.The increase in output due to the same one-unit increase in capital is the greatest at point ________.

Can unionization in an industry adversely affect productivity? Explain your answer.

Scenario: Red Country and Purple Country have identical aggregate production functions. The amount of physical capital stock available to each country is equal. Labor supply in Red Country is HR, while the labor supply in Purple Country is HP. -Refer to the scenario above.Suppose Red Country experiences a flux of immigration that significantly increases its workforce.What will happen if the country's physical capital stock remains unchanged?

Suppose a country's labor supply increases in a year while its physical capital stock remains constant.Which of the following is likely to happen in this case if output is a function of capital and the total efficiency units of labor?

Which of the following is true?

Scenario: Two economies, A and B, have identical aggregate production functions with diminishing returns. In both economies, capital and labor are equally important for production. Economy A has twice as many efficiency units of labor as economy B. Economy B has twice as much physical capital stock as economy A. -Refer to the scenario above.Which of the following statements is true?