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The Neoclassical growth theory is based on the existence of an aggregate production function, showing the relationship between labour (L), capital (K), technology (A), and real GDP (Y). The table below shows various values for L, K, and A. Assume that the production function takes the following form,

2073_Compute the employment rate and the level of productivity2.png

1568_Compute the employment rate and the level of productivity1.png

a. Using the production function shown above, compute real GDP for each case and complete the table.

b. In the first part of the table, capital is constant but labour is increasing. What property of the production function is displayed? Explain.

c. In the second part of the table, capital and labour are increasing by the same proportion. What property of the production function is displayed? Explain.

d. What type of growth is being shown in the third part of the table?

Microeconomics, Economics

  • Category:- Microeconomics
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