The next questions refer to the following.
Suppose the economy has the production function Y = .8K, gross investment is 10% of national income, and the rate of depreciation is 5% of the capital stock.
-If the capital stock suddenly doubles,output will rise by
A) 80%
B) a factor of 1.6
C) 100%
D) 10%
E) 5%

Question

Quizplus · Accepted Answer

According to the production function Y = .8K, when K doubles, output (Y) also doubles. Therefore, output will increase by 100%.

The Next Questions Refer to the Following