Suppose that the production function is Y = AK0.7L0.3, the number of workers equals 800, the capital stock is $150,000, and total factor productivity is 3
What is the value of real GDP? What will happen to real GDP if total factor productivity doubles?
Y = AK0.7L0.3 = 3 ($150,000)0.7 × (800)0.3 = $93,607.82. If total factor productivity doubles, GDP will also double, and will equal $187,215.64
Economics
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