Exam 6: Aggregate Incomes

Industria and Agraria are two neighboring countries.Suppose Good X is the only good produced in both countries and its production is a function of physical capital and the efficiency units of labor.It is found that a one-unit increase in capital leads to a higher increase in the production of Good X in Agraria than in Industria.Explain this outcome if both countries have the same number of efficiency units of labor.

If a country's GDP increases and all other variables remain constant,________.

Scenario: The price of a standard basket of goods in Country A is 10 pesos. The price of the same basket of goods in country B is 25 francs and $5 in the United States. Country A has an income per capita of 60,000 pesos, and country B has an income per capita of 100,000 francs. Assume full employment in both countries. -Refer to the scenario above.If GDP remains constant but the population in Country B grows by 50 percent over the next 5 years,how will the standard of living change in Country B?

Scenario: The price of an iPhone 5s in the United States is $399. The table below lists the income per capita and the price of the same iPhone in the domestic currencies of four different countries in 2014. -Refer to the scenario above.What is the PPP-based exchange rate between the currency of Country 1 and the U.S.dollar?

Two countries,Rhodia and Rubium,have identical production functions in the form Y = A × K⁰.²⁵ × H⁰.⁷⁵,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.Both countries have the same amount of physical capital stock and use the same technology.However,the total efficiency units of labor in Rhodia is higher than that in Rubium.Which of the following is likely to be true in this case?

Scenario: The price of a standard basket of goods in Country A is 10 pesos. The price of the same basket of goods in country B is 25 francs and $5 in the United States. Country A has an income per capita of 60,000 pesos, and country B has an income per capita of 100,000 francs. Assume full employment in both countries. -Refer to the scenario above.The difference between the GDP per capita in Country A and country B is ________.

The following table shows economic data for two countries. -Refer to the table above.GDP per capita is higher in which country?

Suppose an economy has the production function Y = A × K¹/⁴ × H³/⁴,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.Which of the following is true of this economy?

Which of the following is true?

The following figure shows two aggregate production functions. -Refer to the figure above.Which of the following best describes the difference between aggregate production functions 1 and 2?

Scenario: Assume the following aggregate production functions for two countries, A and B, respectively. YA=A KA¹/² ᴴA¹/² ʸB=A KB²/³ ᴴB¹/³ -Refer to the scenario above.What is true about the aggregate production functions?

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.Economy A has a higher GDP if ________.

A country's unemployment rate fell from 6 percent to 5 percent during a year.If the country's total population,physical capital stock,and output remain unchanged,________.

What does the Law of Diminishing Marginal Product state?

The GDP of a small country is $4,150,000,and the size of its employed labor force is 5,000.The income per worker in the country is ________.

In an economy,if three-fourths of national income goes to the human capital of workers and one-fourth to physical capital stock,the Cobb-Douglas production function for this economy will be ________,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.

Inventia has 1 million workers.Suppose 50,000 workers migrate from a neighboring country to join Inventia's workforce.Which of the following will happen in this case if Inventia's physical capital stock remains unchanged?

Which of the following tools is used to compare the income per capita across countries?

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.If you were to draw the aggregate production functions for economies A and B,holding efficiency units of labor constant,you would draw ________.

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.Where would HR lie on the graph if Red Country and Purple Country faced an aggregate production function with constant returns to efficiency units of labor and if efficiency units of labor exceed HP?