Suppose the economy's production function is Y = AK0.3N0.7. If K = 2000, N = 100, and A = 1, then Y = 246. If K and N both rise by 20%, and A is unchanged, by how much does Y increase?
A. 5%
B. 20%
C. 10%
D. 15%
Answer: B
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The concept of exogeneity is important because
A) it clarifies whether or not the variable is determined inside or outside your model. B) maximum likelihood estimation is no longer valid. C) under strict exogeneity, OLS may not be efficient as an estimator of dynamic causal effects. D) endogenous variables are not stationary, but exogenous variables are.
Excludability is the property of a good whereby
a. one person's use diminishes other peoples' use. b. a person can be prevented from using it. c. the government rations the quantity of a good that is available. d. the resource is congestible.
In the long run, a year-long drought that destroys most of the summer's wheat crops causes permanently:
A. higher prices. B. lower prices. C. lower output. D. None of these is true.
If the Fed has announced that it plans on increasing the interest rate it will
A. engage in contractionary open market operations, thereby increasing the money supply. B. engage in expansionary open market operations, thereby increasing the money supply. C. engage in expansionary open market operations, thereby decreasing the money supply. D. engage in contractionary open market operations, thereby decreasing the money supply.