Answer:
Therefore new level of output = (64x0.5)*(64.0.5) = 1,024
Explanation:
Suppose the production function in an economy is Y = K0.5L0.5,
where K is the amount of capital and
L is the amount of labor.
The economy begins with 64 units of capital and 16 units of labor.
If a sudden immigration quadruples the size of the population, while the capital stock is unchanged, what is the new level of output?
K remains 64 and L= 16 x 4 = 64
Therefore new level of output = (64x0.5)*(64.0.5) = 1,024
What is the new wage and rental price of capital?
The rental price for capital is expected to remain unchanged because there is no change in the quantity of capital But the wage level is expected to drop because of excess supply due to the immigration boom.
What share of output does labor receive now?
The function remains unchanged in proportion which is 0.5 but in absolute figures it will receive 0.5*1,024 = 512
Answer: Option (D) is correct.
Explanation:
If the potential GDP is 70 and economy is in recession. Potential GDP is the GDP of an economy which can be achieved with the best utilization of economy's resources.
The amount of the shortfall in planned aggregate expenditure is equal to the vertical distance between the 45 degree line and the AE = Y, at a level of potential real GDP.
This is also shown by an arrow in the diagram.
Answer:
B) John can expect to earn $120,000 in revenue more by expanding, but that is less than the cost of expansion, $150,000.
Explanation:
If John decides not to expand his expected revenue will be = ($100,000 x 50%) + ($300,000 x 50%) = $50,000 + $150,000 = $200,000
If John decides to expand his expected revenue will be = ($100,000 x 30%) + ($300,000 x 30%) + ($500,000 x 40%) = $30,000 + $90,000 + $200,000 = $320,000
If John decides to expand, his revenue will increase by $120,000.
Since we are not told if John's revenue is yearly or not, I assume that it includes a whole business or project cycle. The cost of expanding is $150,000 while the incremental revenue is only $120,000.
Explanation:
For continuous compounding, we use the following formula
<u>Scenario 1 : </u>
FV = $ 90
N = 2 years
I = 6%
PV= ?
PV = $ 79.82
<u>Scenario 2:</u>
PV = $ 75.17
<u>Scenario 3:</u>
PV = $ 70.80
