Scenario: Tree Country has a population of 18,000 people, of whom two-thirds are part of the workforce. The country's only asset is wood, where K = 18,000. The country only produces wooden furniture. In the figure below, Y stands for GDP, and H equals efficiency units of labor.

-Refer to the scenario above.Increased rainfall has led to 10 percent faster tree growth than usual.At the same time,10 percent of Tree Country's population has decided to leave the country.How do these changes affect aggregate production?
A) If physical capital and human capital are weighted equally, GDP will remain constant.
B) GDP per capita will decrease, while GDP will increase.
C) If technology is becoming more efficient, aggregate production will increase.
D) Aggregate production may increase or decrease, depending on the aggregate production function.

Question

Scenario: Tree Country has a population of 18,000 people, of whom two-thirds are part of the workforce. The country's only asset is wood, where K = 18,000. The country only produces wooden furniture. In the figure below, Y stands for GDP, and H equals efficiency units of labor.
 
-Refer to the scenario above.Increased rainfall has led to 10 percent faster tree growth than usual.At the same time,10 percent of Tree Country's population has decided to leave the country.How do these changes affect aggregate production?
A) If physical capital and human capital are weighted equally, GDP will remain constant. 
B) GDP per capita will decrease, while GDP will increase. 
C) If technology is becoming more efficient, aggregate production will increase. 
D) Aggregate production may increase or decrease, depending on the aggregate production function.

Quizplus · Accepted Answer

The increase in rainfall will lead to faster tree growth, which could potentially increase aggregate production, but the decrease in population will decrease the number of workers and, therefore, decrease aggregate production. The net effect on aggregate production is uncertain and dependent on the specific aggregate production function.

Scenario: Tree Country Has a Population of 18,000 People, of Whom