Consider the following aggregate production function: Y=100×L×K, where A is the total factor productivity, K is...

Consider the following aggregate production function: Y=100×L×K, where A is the total factor productivity, K is the amount of capital in the economy, L is the labour force, and Y is the GDP.

Is this aggregate production function exhibiting the constant returns to scale? Explain how you know. (2)

Is this aggregate production function exhibiting the diminishing marginal product of capital? Explain how you know. (2)

In 1867, the government employed 6% of the country’s workers. Since then, the country’s labour force has been growing an average 0.5% a year while the government’s employment has been growing an average 1% a year. What is the share of the government employment in the country’s labour force by 2011? Explain how you know. (2)

3. Investopedia.com explains that “Bitcoin is a digital or virtual currency created in 2009.” Is Bitcoin money? Explain.

Solutions

Expert Solution

Feel free to leave a comment below ? to clarify any further doubts

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BITCOIN

To lesser or greater extent, Bitcoin and many cryptocurrencies in general satisfy the three most basic properties of any currency / money as defined by economists :

It is a store of value – you can stash away $50K in your basement, effectively sending money to the future version of you.
It is a unit of account – in today’s world prices are decided and quoted in units of money rather than units of cigarettes, as in the example above
It is a medium of exchange – money facilitates the exchange of value at some pre-decided rate

Rahul Sunny answered 1 year ago

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