8) Suppose you are asked to analyze an economy with an employed labor force of 1

Question

8) Suppose you are asked to analyze an economy with an employed labor force of 100 million workers, a capital stock of 25,000 billion USD and total factor productivity equal to 5. You also estimate the APF for the country to be: .

a) What is the value of RGDP?

b) If the employed labor force increases by 10%, what is the value of RGDP now?

c) Sketch a graph of your results with employment on the X axis.

d) Now suppose that total factor productivity doubles. What is the value of RGDP?

e) Sketch a graph of your results with employment on the X axis.

Explanation / Answer

Gross Domestic Product or GDP is the most acurate and an apt definition of the condition of a country's economy.

The question suggests facts about the country's economy, although for calculation of RGDP various other factors apart from those mentioned above need to be conosidered and calculated.

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