A small economy increased its capital per hour worked (K/L)from $40,000 to $50,000.As a result, real GDP per worker (Y/L)grew from $20,000 to $25,000.If the economy increases its capital per hour worked by another $10,000 to $60,000, but there is no change in technology, by how much more and in what direction will output per worker change?

Question

Quizplus · Accepted Answer

The increase in capital per hour worked from $50,000 to $60,000 is smaller than the previous increase from $40,000 to $50,000. Therefore, the increase in output per worker is also likely to be smaller than the previous increase from $20,000 to $25,000. Additionally, since there is no change in technology, the increase in output per worker will be solely due to the increase in capital per hour worked. Therefore, the increase in output per worker will be less than $5,000.

A Small Economy Increased Its Capital Per Hour Worked (K/L)from