Two countries, Baltonia and Polonia, have aggregate production functions of the form:
Y = A × K1/3 × H2/3
Both countries have the same number of efficiency units of labor and use the same technology.
However, Baltonia has a lower capital stock than Polonia. Which of the following is likely to be true in this case?
A) The poverty rate in Baltonia is lower than that in Polonia.
B) The gross domestic product of Baltonia is lower than that in Polonia.
C) The gross domestic product of Baltonia is higher than that in Polonia.
D) The Human Development Index of Baltonia is higher than that of Polonia.
B
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