The economy of North Haverbrook is comprised of 30,026 working able inhabitants and hold a capital...

The economy of North Haverbrook is comprised of 30,026 working able inhabitants and hold a capital stock of 45,000. Through empirical work, it was discovered that the share of labour income (wage) was 10% of GDP (turns out they don't have schools), share of capital was 90% and that using a cobb-Douglas production function was able to properly approximate the production behaviour of this economy. And that tech (A) is 1.

[2 points] what will be North Haverbrook's output? (my answer:43215)
[2 points] what is the equilibrium real wage rate?(my answer:0.14)
[2 points] what is the equilibrium real capital rental rate?(my answer:0.8643)
[3 points] Given it's current situation, should North Haverbrook follow a policy to increase its labour force, or increase its capital stock? (having for goal to increase output). Why? Show your logic.
[3 points] Given it's currency situation (independent of d) ), should North Haverbrook follow a policy which would increase schooling, which will increase the share of labor to 15% (share of capital changes to 85%), or should it alternatively increase capital stock by 1000. Which will be its best option (having for goal to increase output). Why? Show your logic.

Please help me check my answers from a-c, and answer questions d and e!!! Thanks.

Expert Solution

Rahul Sunny answered 4 months ago

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